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Currencies

Nigeria’s forex devaluation timeline – 2020

Speculations started March 12 that the naira might be devalued. This is a timeline of every decision taken since the first devaluation.

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parallel market, Covid-19: N3.5 trillion disbursed as stimulus package for the Nigerian economy, CBN Vs NESG: Waving the white flag for the benefit of Nigerians, Exchange Rate Unification: CBN devalues official rate to N380/$1, Nigerian banks have written off N1.9 trillion impaired loans in past 4 years, CBN sandbox operations, Stirling Trust Company Limited, Key highlights of the October 2020 Business Expectations Survey Report, A Total of N3.5 trillion was disbursed in the wake of the COVID-19 pandemic, in addition to several other interventions to reflate the economy - CBN, BOFIA 2020: Steps forward or backwards for Nigerian banks, Total credit to the economy rose to N19.54trillion – CBN Governor

Since the first quarter of the year, Nigeria has faced an exchange rate crisis triggered by the drop in oil prices. It started after two of the world’s largest oil producers, Saudi Arabia and Russia, disagreed on how to proceed concerning oil supply cuts, which triggered a price war that pushed oil prices to crash to as low as under zero dollars.

In March, the world fully became aware of the existential threat that was the Covid-19 pandemic, which has since affected millions of people globally and killed hundreds of thousands. These twin events have had a telling effect on Nigeria’s economy. As an economy highly dependent on crude, the oil price war meant Nigeria earned less from crude oil sales cascading to an even larger problem – Forex.

With oil prices down, pressure on Nigeria’s exchange rate grew, leading to speculations of a devaluation to reflect the true value of the naira. Thus began one of the most significant deluges of policy pronouncements and flip flops on the management of Nigeria’s foreign currency.

READ: Nigeria to post bigger contraction in Q3, as PMI deeps further

In this tracker, Nairametrics collates a timeline of all the forex-related policy decisions and denials that have occurred since March 2020. This timeline is updated regularly as new information becomes available.

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December 02, 2020

Central Bank of Nigeria (CBN) issued an update to its recent circular on the management of remittances from diaspora Nigerians. In a circular posted on its website, the apex bank instructed banks to transfer all diaspora remittances to the domiciliary accounts of the beneficiaries or pay the customers in foreign currency.

On payment of foreign transfers, it also clarified that the choice of how the money should be paid, whether transfer or dollar cash withdrawal, was left to the beneficiary of the remittance.

The circular also instructed the IMTOs to ensure the foreign currency was deposited into their corresponding deposit money bank accounts. It also confirmed banks were to pay the dollars to the beneficiaries either via transfers to domiciliary accounts or in cash.

November 30, 2020

The Central Bank of Nigeria (CBN) announced the amendment of procedures for receipt of diaspora remittances in an apparent and frantic attempt to improve liquidity in the forex market and reduce the disparity between the black market and official I&E window.

The disclosure was made in a circular issued by the CBN on Monday, November 30, 2020, to all authorized dealers and the general public, and signed by its Director for Trade and Exchange Department, Dr O.S. Nnaji.

In the new amended procedure, CBN stated that beneficiaries of Diaspora Remittances through International Money Transfer Operators (IMTOs) would thenceforth receive such inflows in foreign currency (US Dollars) through the designated bank of their choice.

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November 18, 2020

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Central Bank of Nigeria (CBN), in a new circular, clarified its position on the removal of third parties from buying of foreign exchange routed through Form M, letters of credit, and other forms of payment

While reiterating its earlier directive that destination payment for all forms M, letters of credit, and other forms of payment should be made directly to the ‘Ultimate Supplier of Products,’ it gave conditions that must be met by importers if they chose to use a buying company other than the primary manufacturer.

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That was disclosed in a circular with Reference number TED/FEM/FPC/GEN/01/009, which was issued by the CBN to all authorized dealers and the general public on November 18, 2020, and signed by its Director for Trade and Exchange, Dr. O. S. Nnaji. The circular was a follow up to one earlier issued by the apex bank on the same subject matter in August 2020.

November 17, 2020

The Federal Government announced plans to make foreign exchange available to petroleum product marketers, in order to make the importation of petrol into the country competitive, reduce the rising cost of the product, and stop the overdependence on the Nigerian National Petroleum Corporation (NNPC) for its importation.

The disclosure was made by the National President of Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Okonkwo, after the oil marketers had met with officials of the Federal Ministry of Finance on the need to make the foreign exchange available for petrol imports.

November 11, 2020

The naira remained stable against the dollar, closing at N465/$1 at the parallel market, as Bureau De Change operators got another round of dollar supply from the Central Bank of Nigeria.

November 03, 2020

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The naira remained stable against the dollar, closing at N463/$1 at the parallel market on Tuesday, November 3, 2020, as BDCs got another round of dollar supply from CBN.

That was also as businesses that were shut down due to the outbreak of violence in Lagos and some parts of the country during the protests against the special anti-robbery unit (SARS) and police brutality by the Nigerian youths got back to full activity.

October 16, 2020

Banks limited foreign exchange transactions by both individuals and corporate organizations on the unofficial black market to curb speculation.

That was despite the continuation of the protest against the special anti-robbery unit (SARS) by the Nigerian youth which limited movement in major cities across the country, especially Lagos.

October 7, 2020

The CBN sold over $450 million to BDCs since the resumed forex sales on Monday, September 7, 2020. That was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.

However, the exchange rate against the dollar failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.

BDC operators urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.

September 25, 2020

The CBN sold over $200 million to BDCs since the resumed forex sales on Monday, September 7, 2020. It was expected to inject more liquidity to the retail end of the foreign exchange market, and discourage hoarding and speculation.

However, the exchange rate against the dollar failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.

BDC operators urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.

September 12, 2020

The World Bank expressed reservations about the Foreign Exchange measures rolled out by the Central Bank of Nigeria. The multilateral bank urged the CBN to intensify its efforts towards easing the pressure on the country’s FX market.

That was disclosed by the World Bank’s country director, Shubham Chaudhuri, via email to an inquiry by Bloomberg.

Chaudhuri said, “stronger action and a clear commitment from the CBN would go a long way towards facilitating a stronger recovery, despite its recent resumption of dollar sales to the BDCs after a 5-month suspension.”

September 11,2020

The presidency explained why President Muhammadu Buhari had ordered the Central Bank of Nigeria (CBN) to stop making available, foreign exchange to importers of fertilizer and food item, despite criticisms from some FX analysts and stakeholders.

It revealed that the move by the president to suspend the allocation of foreign exchange for food and fertilizer imports was an action borne out of patriotism.

The disclosure was made by the Senior Special Assistant to the President on Media and Publicity, Garba Shehu, when he appeared as a guest, on Channels Television’s Sunrise Program, on Friday September 11, 2020.

September 6, 2020

A memo circulating online indicated that the Central Bank had instructed banks to Post-No-Debit on the accounts of 38 companies.

A Post-No-Debit (PND) is basically an instruction to banks not to allow any withdrawal or transfer from the bank account of account owners, essentially blocking the account from outflows. It is usually drastic a measure taken to allow for investigation and possible reclaiming of any illegal inflow into an account.

The CBN did not state why the accounts were flagged, but sources informed Nairametrics that it was due to suspicion of forex infractions.

September 3, 2020

Nigeria’s central bank pumped in $50 million into the FX market on Monday in a bid to test demand and supply and more importantly, the price of naira against the dollar.

$50 million was sold to foreign investors on the spot and forward market in what it termed a “test trade to gauge the level of dollar demand” in the market.

 

August 28, 2020

The Central Bank of Nigeria (CBN) barred operators of Payment Service Banks (PSBs) from accepting foreign exchange deposits and to accept any closed scheme electronic value (airtime) as a form of deposit or payment.

This was disclosed by the apex bank in the reviewed guidelines for licensing and regulations of PSBs released on its website.

August 27, 2020

Nigeria’s Central Bank issued a circular authorizing and instructing dealers to sell forex to end users at N386/$1.

In a circular titled, “Weekly Exchange Rate for Disbursement of Proceeds of International Money Transfer Service Operations” the apex bank detailed the applicable exchange rate of proceeds of IMTOs for the period, August 31, 2020.

Get financial and economic data from Nairametrics on Nairalytics


August 26, 2020

The Central Bank of Nigeria (CBN) vowed to go tough on exporters who were guilty of forex non-repatriation. It was part of the CBN’s ongoing efforts to resolve the prevalent forex crisis in the country by increasing forex liquidity.

To that end, the CBN directed banks to submit the names, addresses, and Bank Verification Numbers (BVNs) of all the exporters who had failed to repatriate their export proceeds. Necessary ‘action’ would be taken against such defaulters, the CBN said in a statement.

The statement further noted that the Central Bank Governor, Godwin Emefiele, gave the directive on August 25, 2020, while virtually attending a Bankers’ Committee meeting.

READ: CBN says 22 banks to restructure over 35,000 loans due to COVID-19


August 24, 2020

Central Bank of Nigeria (CBN) issued a circular removing buying agents/companies or any third party from accessing its SMIS forex window through FORM M forex purchases.

In a circular dated August 24, 2020, the apex bank instructed that “Authorized Dealers are herby directed to desist from the opening of Form M whose payment is routed through a buying company/agent or any other third parties” effectively eliminating third parties or middlemen from transacting in forex deals in its official SMIS window.”

READ: What Nigeria may have bargained for with Emefiele’s reappointment


August 6th, 2020

Information on the website of the CBN revealed the apex bank had adjusted the official exchange rate to N380/$1 from N360.1/$1. The adjustment occurred on Thursday, August 6th, 2020.

It suggested the CBN might have unified the exchange rate in line with the promise made by the Governor of the Central Bank of Nigeria.


July 13, 2020

CBN restricted access for the importation of maize through the official CBN forex window.

It hinged its decision on the need ‘to increase local production, stimulate a rapid economic recovery, safeguard rural livelihoods and increase jobs which were lost as a result of the ongoing COVID-19 pandemic.’


July 3, 2020

CBN reportedly instructed bidders at its Secondary Market Intervention Sales (SMIS) to increase their bidding price to N380/$1 floor. The SMIS is the market where importers bid for forex using Letters of Credit and Forms M.

The apex bank allegedly informed banks that they would only accept bids from N380/$1 and above, and no longer N360/$1 meaning those who bid lower will not get any forex allocation.

Transaction success in this market is based on bids with those who bid higher than the floor as they are often in an advantageous position to secure forex.


June 23, 2020

The Governor of the Central Bank, Godwin Emefiele, confirmed that the CBN would continue to pursue unification around its Nafex rate. The NAFEX rate is the forex window where Investors and Exporters transact dollars on market-determined prices. The CBN Governor said this at an Investors Conference with the Federal Government of Nigeria by CitiBank.


May 21, 2020

The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, warned businesses and individuals against patronizing the parallel market, popularly called the black market.

He warned them to stop using black markets for foreign currency exchange, following the liquidity crisis triggered by low oil prices and a shortage of dollars.

READ: Exchange rate depreciates at NAFEX window as forex liquidity drops further by 57%


May 19, 2020

The Central Bank of Nigeria (CBN), in its quest to stabilize Naira injected funds to the currency market through the Wholesale Secondary Market Interventions.

The auction was earlier put on hold by the CBN due to the COVID-19 pandemic and dwindling foreign exchange reserves standing at less than $34 billion.

READ: Zenith Bank’s Profit After Tax in H1,2020 rises by 16.8% to N103.8 billion


May 18, 2020

The Central Bank of Nigeria (CBN) tasked industrial conglomerates operating in the country to support efforts of the government to grow the nation’s economy and return it to its green days.

The CBN boss warned that the apex bank would not support the importation of items that could be produced in Nigeria. According to him, the bank could not spend its foreign exchange reserves on what would not boost the economy and generate jobs for Nigerians.


May 10, 2020

The Central Bank of Nigeria (CBN) assured foreign investors that repatriating their funds from the country was secured, despite forex related revenue shortages due to the drop from the sale of crude oil globally.

In the statement, CBN Governor, Godwin Emefiele explained that the apex bank had put in place policies to ensure an orderly exit for those that might be interested in doing so and also urged investors to be patient as such repatriations were processed, owing to the Bank’s policy of orderly exit of investments.


April 29, 2020

The Central Bank of Nigeria (CBN) resumed sales of dollars to SMEs that needed foreign exchange for essential imports, as well as Nigerian students in foreign schools who needed to pay their school fees.

According to a brief statement that was signed by the CBN’s Director of Corporate Communications, Isaac Okoroafor, the apex bank provided over $100 million per week for the two categories of dollar consumers mentioned above.

READ: Covid-19: Timeline of every pronouncement made by Nigeria to support the economy


April 27, 2020

CBN adjusted the exchange rate for import duty payment from N326/$ to N361/$.

With that development, the Nigeria Customs Service (NCS) was directed to effect an increase in duty payable on cargoes imported through the ports.


March 27, 2020

Central Bank of Nigeria (CBN), in a note issued to Bureau De Change operators (BDCs) in the country, suspended the sales of foreign currency for two weeks.

However, it did not affect dollar transactions in the Investors & Exporters (I&E) window. Thus, portfolio investors, as well as businesses that still required FX for foreign transactions settlement, could access the I&E window.


March 24, 2020

The CBN announced it was collaborating with the Nigerian Financial Intelligence Unit (NFIU) to uncover speculation and would charge such dealers for economic sabotage. The bank added that market fundamentals did not support devaluation.


March 22, 2020

The Central Bank of Nigeria (CBN) halted the sale of dollars to the Nigerian National Petroleum Commission (NNPC) by oil companies, including International Oil Companies (IOCs) that operated within the shores of the country.

The apex bank explained that the move to stop the sale of dollars was in line with its commitment to improving foreign exchange supply to the economy as the impact of the novel Coronavirus (COVID-19) pandemic bit harder on the economy.

READ: Nigeria, only oil producing nation that does not benefit from price increase – Sanusi


March 20, 2020

Central Bank of Nigeria devalued its official exchange rate from N307/$1 to N360/$1. The apex bank reflected this change on its website, signaling a confirmation.


March 10, 2020

The Central Bank of Nigeria (CBN) fined Bureau De Change (BDC) operators over various infractions in the foreign exchange market.

Over 100 BDC operators were fined N5 million each for various infractions in the foreign exchange market.

READ: Report accuses World Bank of ‘toying’ with Nigeria over $1.5 billion loan


March 12, 2020

The Central Bank of Nigeria (CBN) debunked speculations making the rounds which suggested that the naira was finally about to be devalued.

According to a statement, the apex bank blamed “unscrupulous players in the foreign exchange market” for spreading the rumour.

Nairametrics Research team tracks, collates, maintains and manages a rich database of macro-economic and micro-economic data from Nigeria and Africa. Our analysts share some of the data collated on Nairametrics, using formats such as docs, tables and charts etc. The team also publishes research based analysis as articles on a regular basis.

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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.

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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 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.

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.”

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.

Specta
  • 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.

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.

  • 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.

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.

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Currencies

Naira falls at NAFEX window as dollar supply continues to decline

The exchange rate between the naira and the dollar depreciated closing at N394.50/$1 at the NAFEX Window.

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Central Bank of Nigeria, Foreign exchange market, Naira vs dollas, IMF, Foreign Reserves, External reserves, CBN, Why do we all love the dollar? 

On January 25, 2021, the exchange rate between the naira and the dollar depreciated closing at N394.50/$1 at the NAFEX (I&E Window) where forex is traded officially.

Forex turnover, however, dropped further by about 10.2% as pressure on the foreign exchange market continues.

The Central Bank of Nigeria (CBN) has moved to create more liquidity in the foreign exchange market as they insisted that deposit money banks and International Money Transfer Operators (IMTOs) must pay diaspora remittances to beneficiaries in dollars as against the initial practice of paying in naira.

This will also help to create more stability and transparency in the forex market.

Also, the exchange rate at the black market where forex traded unofficially remained stable at N477/$1. The exchange rate at the parallel market closed at N477/$1 on the previous trading day of January 22, 2021.

Specta

The exchange rate disparity between the parallel market and the official market is about N82.50, representing a 20.9% devaluation differential.

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N394.50/$1. This represents a 33 kobo drop when compared to the N394.17/$1 that it closed on the previous trading day.

  • The opening indicative rate was N393.30 to a dollar on Monday, this represents a 15 kobo drop when compared with the N393.15 to a dollar that was recorded on Friday, January 22, 2021.
  • The N395 to a dollar was the highest rate during intra-day trading before it closed at N394.50 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 dropped by 10.2% on Monday, January 25, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover declined from $44.51 million on Friday, January 22, 2021, to $39.99 million on Monday, January 25, 2021.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
  • There are fears that the exchange rate at the black market might be under pressure in the coming weeks as importers scramble for dollars to meet their demands.

Oil price steady rise

Brent crude oil price is at about $55.60 per barrel as of Tuesday morning, as it moves towards the $60 mark, a strong sign that global demand could sustain price increases in 2021.

  • This appears as a boost to Nigeria as the country’s crude oil price benchmark for 2020 was $40 while it projected an oil production output of 1.8 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.

Nigeria rising 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.
  • 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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Currencies

Naira falls across forex markets as CBN moves against IMTOs

The exchange rate at the black market where forex traded unofficially depreciated at N477/$1.

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Naira falls across forex markets as businesses resume after public holidays

On January 22, 2021, the exchange rate between the naira and the dollar depreciated closing at N394.17/$1 at the NAFEX (I&E Window) where forex is traded officially.

Forex turnover, however, dropped by about 42.2% as pressure on the foreign exchange market continues.

The Central Bank of Nigeria (CBN) in a new circular, read the riot act to the International Money Transfer Operators (IMTOs) as they have threatened to sanction some of them who still facilitate diaspora remittances in naira, contrary to its earlier directive that it must be in foreign currency.

READ: Nigeria faces prolonged exchange rate crisis as oil prices remain stuck at $40

Also, the exchange rate at the black market where forex traded unofficially depreciated at N477/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 21, 2021, representing a N2 drop.

Specta

The exchange rate disparity between the parallel market and the official market is about N82.83, representing a 17.36% devaluation differential.

READ: CBN to prevent exporters with unrepatriated export proceeds from banking services

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N394.17/$1. This represents a 17 kobo drop when compared to the N394/$1 that it closed on the previous trading day.

  • The opening indicative rate was N393.15 to a dollar on Friday, this represents a N1.01 gain when compared with the N394.16 to a dollar that was recorded on Thursday, January 21, 2021.
  • The N395 to a dollar was the highest rate during intra-day trading before it closed at N394.17 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 dropped by 42.2% on Friday, January 22, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover declined from $77.04 million on Thursday, January 21, 2021, to $44.51 million on Friday, January 22, 2021.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
  • There are fears that the exchange rate at the black market might be under pressure in the coming weeks as importers scramble for dollars to meet their demands.

READ: A summer of higher food prices, limited room for monetary policy

Oil price steady rise

Brent crude oil price is at about $55.34 per barrel as of Monday morning, as it moves towards the $60 mark, a strong sign that global demand could sustain price increases in 2021.

  • This appears as a boost to Nigeria as the country’s crude oil price benchmark for 2020 was $40 while it projected an oil production output of 1.8 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: A Joe Biden presidency and its impact on Nigeria’s oil

Nigeria rising 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.
  • 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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