As a fallout of events in the oil market yesterday, the US dollar hit a record high against the Naira in the non-deliverable forward’s markets on Tuesday, April 21, 2020. This was after the US crude futures crashed to negative, a day earlier.
According to Reuters, a one-year dollar/naira non-deliverable forwards stood at 498.5 points up from Monday’s close of 492.4 as shown by data from Refinitiv.
The Nigerian foreign exchange market is reacting to the negative trend and high volatility in the global oil market.
The continuous plunge in oil demand globally is a result of the lockdowns and restrictions caused by the coronavirus pandemic and concerns over global storage facilities which are rapidly getting filled up with tank owners rejecting storage offers.
This saw the US WTI crude in a historic event, selling below zero dollars as oil traders were willing to pay to get the crude oil off their hands ahead of the expiry of the contract for delivery in May. The Brent crude got to just about $22 per barrel and the Nigerian headline crude, Bonny light selling at $20.88 barrels per day.
With Nigeria relying on oil export for about 90% of its foreign exchange earnings, the further crash of crude oil prices puts further pressure on the external reserves and the foreign exchange market.
Meanwhile, with the pressure on the forex market continuing unabated, the naira has depreciated to N420 per dollar at the parallel market according to Aboki fx. This is against the N416 to a dollar that is sold on Friday, April 17, 2020.
This is further exacerbated by the suspension of dollar sales to the Bureau De Change operators