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Currencies

Naira weakens against the dollar by 1.14% amid market uncertainty

The reopening of the economy is expected to put additional pressure on the naira as more businesses try to meet up with accumulated obligations.

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Exchange rate depreciates at NAFEX window as forex liquidity drops further by 57%, Central Bank Continues intervention in Forex market to stabilize Naira, Naira to depreciate slightly over $1.52 billion maturing contracts expires, Naira hits N388.84 to $1 at the currency spot market, Investors and Exporters (I&E) window, Naira weakens against the dollar by 1.14% amidst uncertainty, Naira gains against the dollar at I&E window, forex liquidity up by 242%  

The naira was weakened at the parallel market on Monday, thereby depreciating against the dollar. This is the first depreciation of the naira in about two weeks, after four consecutive rounds of appreciation against the dollar.

According to information obtained from Abokifx, the naira depreciated to N445 to a dollar on Monday, June 2, 2020. This shows a loss of N5 (or 1.14% decline) when compared to the N440 to a dollar that was recorded last week Friday.

The local currency was weakened at the parallel market following the announcement of the resumption of domestic flight operations on June 21, 2020, by the Federal Government. The uncertainty resulting from the delayed resumption of sales of dollars to the Bureau De Change (BDC) operators also contributed.

In a related development, the local currency was stable at the Investors and Exporters (I&E) window, having recorded no movement. The naira exchanged at N385.50 to a dollar on Monday, June 2, 2020, which was the same rate it ended with on Friday last week. This came against the backdrop of a marginal increase in the daily turnover to $34.35 million at the I&E window, marking an increase of $2.95 million when compared to the $31.40 million that was recorded the previous trading day. In other words, this represents a 9.4% increase in dollar supply to the window.

(READ MORE: Naira drops to N460 against dollar)

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Recall that on April 29, 2020, the Central Bank of Nigeria had announced the resumption of weekly sales of $100 million dollars for school fees and the Small and Medium Enterprises (SMEs), in order to help reduce the pressure on the naira in the foreign exchange market. To a large extent, this has helped to reduce pressure on the naira.

However, despite improvement in the price of crude oil around the world and its positive effect on the country’s foreign exchange earnings, the reopening of the economy is expected to put more pressure on the naira as more businesses try to meet up with accumulated obligations.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Currencies

Naira gains at black market as external reserves improves on higher oil prices

The exchange rate at the black market where forex traded unofficially appreciated at N478/$1.

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Dollar, Exchange rate, FOREX, NAFEX market turnover drop by 59%, Naira crashes to N470/$1 as currency uncertainty worsens 

On January 27, 2021, the exchange rate at the black market where forex is traded unofficially, saw an appreciation to N478/$1. The exchange rate at the parallel market closed at N480/$1 on the previous trading day of January 26, 2021, representing a N2 gain.

Why Naira is appreciating

  • This can be attributed to moderate demand for dollars in the face of tight liquidity in the foreign exchange market.
  • The CBN has also suggested that the dramatic improvement in the country’s external reserve is due to an increase in global crude oil prices. This has increased the capacity of the apex bank to intervene in the foreign exchange market.

READ: Non-oil sector is critical to Nigeria’s economic recovery in 2021 – Cordros Capital

To streamline supply and ensure there is enough to meet rising demand, the CBN moved to ensure strict monetary control of the forex market threatening to expel exporters who refuse to remit foreign exchange proceeds in the NAFEX market. It also warned against paying diaspora remittances in naira. 

The CBN may have also confirmed the forex pressures businesses are facing in its monetary policy communique of January 26, 2020, when it cited it as a reason for the weak purchasing managers index.

“This weak performance was attributed to the resurgence of the pandemic, foreign exchange pressures, increased costs of production, a general increase in prices and decline in economic activities.”

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READ: Naira gains at NAFEX window as external reserves increase by $1 billion

Trading at the official NAFEX window

The Naira depreciated marginally against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N394.25/$1. This represents a 25 kobo drop when compared to the N394/$1 that it closed on the previous trading day.

  • The opening indicative rate was N394.06 to a dollar on Wednesday, representing a 46 kobo drop when compared with the N393.60 to a dollar that was recorded on Tuesday, January 26, 2021.
  • The N396 to a dollar was the highest rate during intra-day trading before it closed at N394.25 to a dollar. It also sold for as low as N385/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window dropped by 52.45% on Wednesday, January 27, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover declined from $108.34 million on Tuesday, January 26, 2021, to $51.51 million on Wednesday, January 27, 2021.

READ: FG posts 27% revenue shortfall in 2020 as budget deficit hit N6.1 trillion

Oil price steady rise

Brent crude oil price hit about $55.81 on Thursday morning as US crude stockpiles decrease by about 5.2 million barrels last week. A higher crude oil draw (a decrease in crude oil inventory) is attributed to higher refining activities in the world’s largest economy.

Crypto
  • Oil prices have been dragging since last week after the IEA released a report that slashed its outlook for oil in 2021.
  • According to the IEA, “Global oil demand is expected to recover by 5.5 mb/d to 96.6 mb/d in 2021, following an unprecedented collapse of 8.8 mb/d in 2020. For now, a resurgence in Covid-19 cases is slowing the rebound, but a widespread vaccination effort and an acceleration in economic activity is expected to spur stronger growth in the second half of the year.
  • “After falling by a record 6.6 mb/d in 2020, world oil supply is set to rise by over 1 mb/d this year, with OPEC+ adding more than those outside the bloc. There may be scope for higher growth given our expectations for further improvement in demand in 2H21. After holding flat at 92.8 mb/d in December, global supply is rising this month with OPEC+ due to ramp up during January.
  • Nigeria needs oil prices to stay above $50 to balance its budget and improve on its 2021 revenue projection of N6.6 trillion for the year.
  • Nigeria’s 2021 budget includes a target crude oil benchmark price of $40/barrel and crude oil production of 1.86 million barrels per day.
  • Nigeria has a production capacity of 2.5 million barrels per day but is subject to OPEC’s crude oil production cuts, which are expected to help sustain higher oil prices.
  • The higher oil prices and steady production output have positively impacted Nigeria’s external reserves, rising sharply to $36.304 million according to central bank data dated January 14, 2020.
  • This is a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.

READ: Oil prices drop amid delay in $900 billion economic stimulus package

Higher oil prices drive up Nigeria’s external reserves

  • The external reserve has dropped for the first time in about 5 weeks to $36.431 billion as of January 26, 2021. However, this is a huge improvement on the $35.373 billion that it was as of December 31, 2020.c
  • Nairametrics had earlier reported that the government may have taken receipt of the $1-1.5 billion World Bank loan. However, excerpts of the CBN Monetary Policy communique of January 26th suggest the inflows may have been driven by higher oil revenues.
  • According to the CBN, “On the external reserves position, the Committee noted the increase in the level of external reserves, which stood at US$36.23 billion as at 21st January 2021 compared with US$34.94 billion at the end of November 2020. This reflected improvements in crude oil prices, partial global economic recovery amid optimism over the discovery and distributions of COVID-19 vaccines by most developed economies.”
  • The external reserves have increased by $1.135 billion since December 31, 2020, when it closed the year at $35.3 billion.
  • Nigeria also needs the external reserves to hit $40 billion if it is to adequately meet some of the pent up demand that has piled up since 2020 when oil prices crashed and the pandemic caused major economic lockdowns.

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Business

CBN appoints 3 Pre-Shipment Inspection and 2 Monitoring Agents for non-oil exports

The CBN has announced the appointment of 3 PIAs and 2 Monitoring/Evaluation Agents for non-oil exports.

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Q1 2020, AfCFTA, African Continental Free Trade Area, Africa Free Trade Agreement, Business new, Nairametrics news

The Central Bank of Nigeria (CBN) has announced the appointment of 3 Pre-Shipment Inspection Agents (PIAs) for non-oil exports with effect from January 15, 2021.

The apex bank in addition, also announced the appointment of Monitoring and Evaluation Agents (MEAs) to oversee the activities of the PIAs in their respective zones of operations.

This disclosure is contained in a circular that was issued by the CBN on January 26, 2021, and signed by its Director for Trade and Exchange Department, Dr. O. S. Nnaji.

The CBN in the circular said that the Pre-Shipment Inspection Agents are;

  • Angila International Limited with the responsibility to cover North West and North Central Zones,
  • Neroli Technologies Limited to cover South West and South-South,
  • Gojopal Nigeria Limited has the responsibility to cover the South East and North East.

Similarly, the newly appointed Monitoring and Evaluation Agents are;

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  • Foops Integrated Services Limited with the responsibility to cover North East, North West and North Central,
  • Ace Global Depository whose areas of coverage include South East, South West, and South-South.

The apex bank in the circular directed all authorized dealers, operators in the non-oil export sector, and members of the general public to take note and ensure compliance.

What you should know

  • It can be recalled that in a revised policy, the Federal Government had said that all non-oil exports from Nigeria shall be subject to inspection by Pre-Shipment Inspection Agents appointed for that purpose by the government.
  • The focus of the PIAs shall be to ascertain the quality, quantity, and price competitiveness of exports from Nigeria and shall collaborate with other regulatory agencies like NAFDAC, SON, Plant and Animal Quarantine, Federal Produce Inspectorate, and so on, for quality inspection of regulated products.

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Currencies

Naira falls to N480/$1 at black market as CBN recognizes forex pressures is weakening the economy

The exchange rate at the black market where forex traded unofficially depreciated at N480/$1 on Tuesday, January 26, 2021.

Published

on

Dollar, Exchange rate, FOREX, NAFEX market turnover drop by 59%, Naira crashes to N470/$1 as currency uncertainty worsens 

On January 26, 2021, the exchange rate at the black market where forex traded unofficially depreciated at N480/$1. The exchange rate at the parallel market closed at N477/$1 on the previous trading day of January 22, 2021, representing a N3 drop.

Why Naira is depreciating

  • This can be attributed to demand pressure in the foreign exchange market as economic activities resumed in earnest following the end of the Christmas and New year holidays.
  • Forex dealers also inform Nairametrics that an increase in demand from Nigerians looking to send their wards back to school abroad has also piled pressure on the demand for the greenback.
  • A cross-section of importers have also resumed import activities piling pressure on the black market to meet their forex demands.

READ: Nigeria’s foreign debt has breached a 15-year trigger

To streamline supply and ensure there is enough to meet rising demand, the CBN moved to ensure strict monetary control of the forex market threatening to expel exporters who refuse to remit foreign exchange proceeds in the NAFEX market. It also warned against paying diaspora remittances in naira. 

The CBN may have also confirmed the forex pressures businesses are facing in its monetary policy communique of January 26, 2020 when it cited it as a reason for the weak purchasing managers index.

“This weak performance was attributed to the resurgence of the pandemic, foreign exchange pressures, increased costs of production, general increase in prices and decline in economic activities.”

Specta

READ: Non-oil sector is critical to Nigeria’s economic recovery in 2021 – Cordros Capital

Trading at the official NAFEX window

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N394/$1. This represents a 50 kobo gain when compared to the N394.50/$1 that it closed on the previous trading day.

  • The opening indicative rate was N393.60 to a dollar on Tuesday, representing a 30 kobo drop when compared with the N393.30 to a dollar that was recorded on Monday, January 25, 2021.
  • The N396 to a dollar was the highest rate during intra-day trading before it closed at N394 to a dollar. It also sold for as low as N390/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window rose significantly by 170.9% on Tuesday, January 26, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover increased from $39.99 million on Monday, January 25, 2021, to $108.34 million on Tuesday, January 26, 2021.

READ: Why you should be worried about the latest drop in external reserves

Oil price steady rise

Brent crude oil price rose to about $55.87 on Wednesday morning as US crude stockpiles decrease by about 5.2 million barrels last week. A higher crude oil draw (a decrease in crude oil inventory) is attributed to higher refining activities in the world’s largest economy.

Crypto
  • Oil prices have been dragging since last week after the IEA released a report that slashed its outlook for oil in 2021.
  • According to the IEA, “Global oil demand is expected to recover by 5.5 mb/d to 96.6 mb/d in 2021, following an unprecedented collapse of 8.8 mb/d in 2020. For now, a resurgence in Covid-19 cases is slowing the rebound, but a widespread vaccination effort and an acceleration in economic activity is expected to spur stronger growth in the second half of the year.
  • “After falling by a record 6.6 mb/d in 2020, world oil supply is set to rise by over 1 mb/d this year, with OPEC+ adding more than those outside the bloc. There may be scope for higher growth given our expectations for further improvement in demand in 2H21. After holding flat at 92.8 mb/d in December, global supply is rising this month with OPEC+ due to ramp up during January.
  • Nigeria needs oil prices to stay above $50 to balance its budget and improve on its 2021 revenue projection of  N6.6 trillion for the year.
  • Nigeria’s 2021 budget includes a target crude oil benchmark price of $40/barrel and crude oil production of 1.86 million barrels per day.
  • Nigeria has a production capacity of 2.5 million barrels per day but is subject to OPEC’s crude oil production cuts, which are expected to help sustain higher oil prices.
  • The higher oil prices and steady production output have positively impacted Nigeria’s external reserves, rising sharply to $36.304 million according to central bank data dated January 14, 2020.
  • This is the highest level since July 2020 and a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.

READ: Naira falls across forex markets as CBN moves against IMTOs

Higher oil prices drive up Nigeria’s external reserves

  • The external reserve has risen to $36.508 billion as of January 21, 2021.
  • Nairametrics had earlier reported that the government may have taken receipt of the $1-1.5 billion World Bank loan. However, excerpts of the CBN Monetary Policy communique of January 26th suggest the inflows may have been driven by higher oil revenues.
  • According to the CBN, “On the external reserves position, the Committee noted the increase in the level of external reserves, which stood at US$36.23 billion as at 21st January, 2021 compared with US$34.94 billion at the end of November 2020. This reflected improvements in crude oil prices, partial global economic recovery amid optimism over the discovery and distributions of COVID-19 vaccines by most developed economies.”
  • The external reserves have increased by $1.135 billion since December 31, 2020, when it closed the year at $35.3 billion.
  • Nigeria also needs the external reserves to hit $40 billion if it is to adequately meet some of the pent up demand that has piled up since 2020 when oil prices crashed and the pandemic caused major economic lockdowns.

Continue Reading
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