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Naira weakens at black market as holiday makers depart Nigeria

The exchange rate at the parallel market suffered its second depreciation of the year.

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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 11, 2021, the exchange rate between the naira and dollar at the black market closed at N475/$1 representing a N3 drop when compared to the N472/$1 it closed on the previous trading day of January 8th, 2021.

This is the second depreciation of the naira this year after falling to N472/$1 on Friday, January 8th 2021. The naira traded at N470/$1 for almost 2 weeks since the 29th of December 2020.

READ: “No forex” banks tell holidaymakers desperate for travel allowance (PTA)

The pressure experienced at the black market is attributed to a surge in demand as holidaymakers source for forex to return back to their bases abroad. Parents of Nigerian pupils whose school abroad has also increased the demand for forex to fund their tuition and allowances. This is likely to sustain demand pressure at the black market which has been a major source of price discovery for the foreign exchange market.

At the NAFEX (I&E Window) where forex is traded officially, the exchange rate closed at N393.33/$1, a slight appreciation from the N393.50 recorded on the previous trading day, January 8, 2021.

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READ: Naira falls at NAFEX window despite 56.6% improvement in dollar supply

Nairametrics understands that the drop in dollar supply is occurring at the same time there was a price increase on Monday, sustaining the previous trading day’s increase. The exchange rate at the I&E window has held steady despite the major depreciation on the last day of trading in 2020 when it closed at N410/$1.

The exchange rate disparity between the parallel market and the official market widened again to N81.67, representing a 17.2% devaluation differential.

READ: Naira gains big at black market as CBN targets $2 billion monthly from IMTO

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The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N393.33/$1 as against N393.50 reported on January 8, 2021.

  • This represents a 17 kobo gain when compared with that of the previous trading day.
  • The opening indicative rate was N393.69 to a dollar on Monday. This represents a 20 kobo loss when compared to the N393.49 that was recorded on Friday, January 8, 2021.
  • The N411 to a dollar was the highest rate during intra-day trading before, it still closed at N393.33 to a dollar. It also sold for as low as N350.27/$1 during intra-day trading.
  • Forex turnover: Forex turnover at the Investor and Exporters (I&E) window declined by 6% on Monday, January 11, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $65.63 million on Friday, January 8, 2021, to $61.73 million on Monday, January 11, 2021.
  • The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
  • 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.

READ: Agro processors appeal to CBN to provide easy Forex access for SMEs

Forex turnover still tepid

Business activities commenced fully on Monday, January 11th as most businesses returned to work from the Christmas and New Year break.

  • Total forex turnover in the first 6 days of trading this year is $235 million compared to $235.75 million traded on the last day of the year in 2020.
  • However, increased demand is expected in the coming days as exporters strive to fulfill letters of credit obligations through their local banks.
  • For now, the CBN appears committed to keeping the exchange rate below N400/$1 but its resolve will be tested in the coming days as demand pressure resumes.
  • Analysts who spoke to Nairametrics believe demand for forex will rise significantly in the first quarter of 2021 as businesses pay for technical and other services, service foreign currency loans, repatriate sales proceeds and dividends.
  • The CBN will also be relying heavily on proceeds from Nigeria’s crude oil to shore up its external reserves while betting on its policy on diaspora remittances to provide liquidity at the retail end of the market.

READ: NERC orders DisCos to increase electricity tariffs, effective January 1, 2021

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Note: Nairametrics Research references its parallel market rates from various traders and also references websites such as Aboki FX. The rates you buy and sell forex might be different from what is published here.

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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

CBN frowns at continued diaspora remittances in naira, introduces sanctions

The CBN has frowned at activities of some IMTOs and unlicensed companies who continue to facilitate diaspora remittances into the country in Naira.

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The Central Bank of Nigeria (CBN) has frowned at activities of some International Money Transfer Operators (IMTOs) and unlicensed companies who continue to facilitate diaspora remittances into the country in Naira.

The apex bank’s reaction follows the contravention of its earlier directive that all diaspora remittances must be paid to the beneficiaries in dollars.

This disclosure was contained in a circular titled, ‘Modalities for Payout of Diaspora Remittances’, issued by the CBN on Friday, January 22, 2021, and signed by its Director Trade and Exchange Department, Dr O.S. Nnaji.

READ: CBN revokes licenses of 7 Payment Service Providers

What the CBN is saying

The CBN in its circular said, ‘’Further to our circular titled ‘Receipt of Diaspora Remittances: Additional Operational Guidelines’, it has come to our notice that some IMTOs and unlicensed companies continue to facilitate diaspora remittances into the country in Naira, “in clear contravention of the Central Bank of Nigeria directive that all remittances be paid to beneficiaries in dollars.’’

Specta

READ: More pressure on the naira as Diaspora remittances to drop by 20%

For the avoidance of doubt, the Central Bank of Nigeria further clarifies as follows;

  1. Only licensed IMTOs are permitted to carry on the business of facilitating diaspora remittances into Nigeria;
  2. All diaspora remittances must be received by beneficiaries in foreign currency only (cash and /or transfers to domiciliary accounts or recipients);
  3. IMTOs are not permitted, under any circumstances, to disburse diaspora remittances in Naira (either in cash or by electronic transfers), be it through remittance settlement accounts (which had been earlier directed to be closed), third party accounts or via any other payment platforms within and/or around the Nigerian financial system.’’

READ: Nigeria’s forex devaluation timeline – 2020

The apex bank in the circular said that the measures were intended to promote transparency, grow diaspora remittances and significantly improve foreign exchange inflows into Nigeria.

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The CBN warned that strict sanctions, including withdrawal of operating licenses, shall be imposed on any individuals and/or institutions found to be aiding, abetting or directly contravening these guidelines.

It went further to say that it shall not hesitate to authorize the closure of the accounts of unlicensed operators in Nigerian banks, including being barred from accessing banking services in Nigeria.

It promised continued monitoring of developments in this regard, adding that it would also issue further guidance as appropriate.

READ: Continuous increase in inflation rate may weaken economy – CBN report

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What this means

With the insistence of the apex bank on its earlier directive, it means that Nigerians living in the diaspora can transfer foreign currency to their relatives and loved ones in the country, who in turn will withdraw the money in dollar cash and sell anywhere they so desire.

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It means they can for instance receive foreign transfers such as Western Union or Moneygram, withdraw it in dollars and then sell at the black market rate or anywhere else they want to. This they believe will help to stabilize the exchange rate and discourage hoarding.

READ: UBS warns Bitcoins could disappear like Myspace

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What you should know

  • It can be recalled that the CBN, had in November 2020, amended the procedure for the receipt of diaspora remittances and insisted that it must be paid in dollars to the beneficiaries, in an apparent and frantic attempt to improve liquidity in the forex market and reduce the disparity between the black market and the official window.
  • Also in an additional guideline for diaspora remittances, the CBN barred IMTOs from sending money to Mobile Money Operators and also stopped the integration of payment services providers to IMTO accounts. It also stopped switches and processors from getting involved in foreign remittances.

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Currencies

Naira gains marginally at NAFEX window, exchange rate to remain stable

The exchange rate between the naira and the dollar appreciated closing at N394/$1 at the NAFEX window.

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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 21, 2021, the exchange rate between the naira and the dollar appreciated closing at N394/$1 at the NAFEX (I&E Window) where forex is traded officially.

However, during intraday trading, the exchange rate traded for as high as N415.76/$1, sustaining yesterday’s figure which is the highest intraday trading tracked by Nairametrics. Forex turnover, however, dropped by about 14% as pressure on the foreign exchange market continues.

READ: Naira stabilizes at black market as external reserve rises by $515 million in 12 days

According to a report from Reuters, the naira is expected to remain stable in the coming week as currency traders watch for policy details at CBN’s first MPC meeting in 2021.

Also, the exchange rate at the black market where forex traded unofficially still remained flat at N475/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 20, 2021.

Specta

The exchange rate disparity between the parallel market and the official market is about N81, representing a 17% devaluation differential.

READ: Naira strengthens at NAFEX window despite 38% drop in dollar supply

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

  • The opening indicative rate was N394.16 to a dollar on Thursday, the same rate that was recorded on Tuesday, January 20, 2021.
  • The N415.76 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 dropped by 13.9% on Thursday, January 21, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover declined from $89.50 million on Wednesday, January 20, 2021, to $77.04 million on Thursday, January 21, 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: The dangling fate of indigenous oil upstream operators

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Oil price steady rise

Brent crude oil price is at about $56 per barrel on Wednesday, 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: Nigeria faces prolonged exchange rate crisis as oil prices remain stuck at $40

Nigeria rising external reserves

  • The external reserve has risen to $36.464 billion as of January 19, 2021.
  • Nairametrics reported on Wednesday that the government may have taken receipt of the $1-1.5 billion World Bank Loan.
  • The external reserves have increased by $1.09 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

Official (NAFEX) Exchange rate hits N415/$1 during Intra-day trading

The exchange rate at NAFEX trades at N415/$1 during Intra-day trading NAFEX as forex turnover rises by 233% rise

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Naira falls across forex markets as businesses resume after public holidays

On January 20, 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.

However, during intraday trading, the exchange rate traded for as high as N415.76/$1 the highest intraday trading tracked by Nairametrics. Forex turnover also rose significantly by 233.6% as demand puts pressure on the foreign exchange market.

On the flip side, the exchange rate at the black market where forex traded unofficially still remained stable at N475/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 19, 2021.

READ: Naira strengthens at NAFEX window despite 61% drop in dollar supply

The exchange rate disparity between the parallel market and the official market is about N80.83, representing a 17% devaluation differential.

Specta

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N394.17/$1. This represents an 82 kobo gain when compared to the N393.35/$1 that it closed on the previous trading day.

READ: FIRS hits 98% of target as it collects N4.95 trillion for 2020 fiscal year

  • The opening indicative rate was N394.17 to a dollar on Wednesday, representing a 21 kobo drop when compared to the N393.96 that was recorded on Tuesday, January 19, 2021.
  • The N415.76 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 increased significantly by 233.6% on Wednesday, January 20, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $26.83 million on Tuesday, January 19, 2021, to $89.50 million on Wednesday, January 20, 2021.
  • The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
  • 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: Naira falls at black market despite over 100% improvement in dollar supply

Oil price steady rise

Brent crude oil price is at about $56 per barrel on Wednesday, as it moves towards the $60 mark, a strong sign that global demand could sustain price increases in 2021.

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  • 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: Naira falls at NAFEX window despite 56.6% improvement in dollar supply

Nigeria rising external reserves

  • The external reserve has risen to $36.464 billion as of January 19, 2021.
  • Nairametrics reported on Wednesday that the government may have taken receipt of the $1-1.5 billion World Bank Loan.
  • The external reserves have increased by $1.09 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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