Forex turnover at the Investor and Exporters (I&E) window continued with its downward slide on Wednesday, July 1, 2020, as it dropped by 28% day on day. This is according to data from the FMDQOTC, an exchange where forex is traded by foreign investors and exporters.  

According to the data tracked by Nairametrics, forex turnover fell from $14.37 million on Tuesday, June 30, 2020, to as low as $10.37 million on Wednesday, July 1, 2020, representing a 28% drop on a day-to-day basis. This is a second consecutive day of decline this week and also the lowest turnover recorded in the I&E window since last week.  

This further reinforces the volatile and uncertain nature of the foreign exchange market with trading volumes apparently irregular and piling pressure on the exchange rate at the NAFEX market and by extension the parallel market.   

The volatility and uncertainty of the forex market seem to persist due to liquidity shortages across markets.  Liquidity remains quite tight in the foreign exchange market, with the average turnover in the I&E market significantly down to about $45.5 million in the month of May compared to $297.5 million that was recorded in January.  

As we have so often reported, accumulated demand for forex in the market is thought to range between $1.5 and $5 billion depending on which analyst you are speaking to. Forex shortages have persisted since the crash in oil prices coincided with the global lockdown due to COVID-19. The rise in demand and contrasting drop in supply has called for another round of devaluation, which the CBN has insisted it has plans to implement. A devaluation last occurred in March. The activities of the speculators seem to have continued unabated.  

Speculators have thus patronized the parallel market, otherwise known as the black market, thereby widening the gap between it and the I&E window. The CBN maintains that the perceived demand cannot be substantiated as the lockdown induced by the COVID-19 pandemic suggest demand should be low due to travel restrictions and drop-in economic activities.  

The further decline in liquidity could further fuel speculations in the black market where the exchange rate has traded at a premium of N60+ over the last few weeks. The CBN claims most of the demand being cited is not represented by any official documentation and that it has informed foreign investors with genuine forex demand to be “patient” and that they will get their forex. 

Exchange rate    

In related news, the exchange rate at the I&E remained stable on Wednesday, closing at N386.50 to a dollar, which was the same rate that was recorded on Tuesday, June 30. The opening indicative rate was N387.08 to a dollar on Wednesday. This represents a loss of 2 kobo when compared to the N387.10 opening rate recorded on Tuesday.  

At the black market where forex is traded unofficially, the naira depreciated further by N2 to a dollar to close at an all time low of N462 to a dollar on Wednesday, as against the N460 to a dollar on Tuesday, the lowest in almost a year. The exchange rate at the beginning of the week was N460 to a dollar. By crossing N460, the exchange rate has broken a psychological ceiling going past N460 for the first time ever.  

Nigeria continues to maintain multiple exchange rates comprising the CBN official rate, the BDC rates, and the NAFEX (I&E window). Nairametrics reported last week that the government is mulling unifying the multiple exchange rates in a bid to increase the amount available for state governments to share.  

The depreciation of the Naira in the black market can be attributed to the shortage of dollar supply which is outweighed by demand as that puts further pressure on the forex market. The negative impact of the coronavirus pandemic on global oil prices has constrained the CBN’s capacity to intervene satisfactorily in the foreign exchange market as dollar inflow has slumped. 

The forex scarcity and drop in revenue puts pressure on the value on the naira despite CBN’s effort to maintain stability across the forex segments. The CBN is expected to continue with its intervention in the foreign exchange market to ensure market stability. 

The spread of novel Corona Virus Disease (COVID-19) in Nigeria touched a new milestone as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 26,484 confirmed cases.

On the 1st of July 2020, 790 new confirmed cases and 13 deaths were recorded in Nigeria, having carried out a total daily test of 4,205 samples across the country.

To date, 26,484 cases have been confirmed, 10,152 cases have been discharged and 603 deaths have been recorded in 35 states and the Federal Capital Territory. A total of 138,462 tests have been carried out as of July 1st, 2020 compared to 134,257 tests a day earlier.

COVID-19 Case Updates- 1st July 2020

• Total Number of Cases – 26,484
• Total Number Discharged – 10,152
• Total Deaths – 603
• Total Tests Carried out – 138,462

According to the NCDC, the 790 new cases were reported from 21 states- Delta (166), Lagos (120), Enugu (66), FCT (65), Edo (60), Ogun (43), Kano (41), Kaduna (39), Ondo (33), Rivers (32), Bayelsa (29), Katsina (21), Imo (20), Kwara (18), Oyo (11), Abia (10), Benue (6), Gombe (4), Yobe (2), Bauchi (2), Kebbi (2).

Meanwhile, the latest numbers bring Lagos state total confirmed cases to 10,630, followed by Abuja (1,935), Oyo (1,391), Kano (1,257), Edo (1,165), Delta (1,131) Rivers (1,088), Ogun (869),  Kaduna (805), Katsina (578), Gombe (507). Bauchi (505), Borno (493), Ebonyi (438), Plateau (382), Imo (352), Enugu (327), Ondo (325), Abia (320), Jigawa (318).

Kwara state has recorded 235 cases, Bayelsa (234), Nasarawa (213), Sokoto (151), Osun (127), Niger (116), Akwa Ibom (86), Adamawa (84), Kebbi (81), Zamfara (76), Anambra (73), Benue (65), Yobe (61), Ekiti (43), Taraba (19), while Kogi state has recorded 4 cases.

READ ALSO: COVID-19: Western diplomats warn of disease explosion, poor handling by government

Lock Down and Curfew

In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.

The movement restriction, which was extended by another two-weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.

On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020.

READ ALSO: Bill Gates says Trump’s WHO funding suspension is dangerous

The Federal Government has announced an increase in the new pump price of Premium Motor Spirit, otherwise known as Petrol, to N143.80 per litre.

According to a monitored report, this was disclosed by Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA), Abdulkadir Saidu, in a circular dated Wednesday, July 1, 2020, to oil marketers,

The statement from the circular says, ‘’After a review of the prevailing market fundamentals in the month of June and considering marketers’ realistic operating costs, as much as practicable, we wish to advise a new PMS pump price band of N140.80-N143.80 per litre for the month of July 2020.’’

‘’All marketers are advised to operate within the indicative prices by the PPPRA.’’

He also pointed out that the ex-depot for collection include the statutory charges of bridging fund, maritime transport average, National Transport Allowance and administrative charges.

The federal government had a few months ago announced its plans to stop the subsidy payment regime as they said that the downstream sector of the oil industry will be fully deregulated. The government said that the prices of all petroleum products which includes fuel would be fully determined by market forces, following the removal of the existing cap on fuel prices.

PPPRA had stated that it arrived at the new price regime after taking into consideration the operating costs of the oil marketers.

It can be recalled that at the beginning of the month of June, there was a minor adjustment of fuel price as it was fixed at N121.50 per litre from N123.50 per litre in May. The new price in July represents an over N20 per litre increase when compared to the price last month.