On January 17, 2021, the exchange rate between the naira and the dollar remained stable to close at N394.67/$1 at the NAFEX (I&E Window) where forex is traded officially.
This is exactly the same rate that was recorded the previous trading day, 14 January 2021.
Also, the exchange rate at the black market where forex traded unofficially maintained stability at N475/$1. The exchange rate at the parallel market closed at N475/$1 on the previous trading day of January 14, 2021.
This is as Nigeria’s external reserve continues to experience a steady rise.
The exchange rate disparity between the parallel market and the official market is about N80.33, representing a 16.9% devaluation differential.
The Naira remained stable against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N394.67/$1, the same rate that it closed on the previous trading day.
- The opening indicative rate was N393.12 to a dollar on Friday, representing a 44 kobo drop when compared to the N392.68 that was recorded on Thursday, January 14, 2021.
- The N414.76 to a dollar was the highest rate during intra-day trading before it closed at N394.67 to a dollar. It also sold for as low as N389/$1 during intra-day trading.
- Forex turnover at the Investor and Exporters (I&E) window declined by 81.3% on Friday, January 15, 2021.
- According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $215.63 million on Thursday, January 14, 2021, to $40.31 million on Friday, January 15, 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.
Oil price steady rise
Brent crude oil price is currently at $54.88 per barrel on Monday, as it moves towards the $60 mark, a strong sign that global demand could sustain price increases in 2021.
- Nigeria’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 is about 5% off the $38.2 billion held as at this time last year.
- Nigeria 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.
- Nigeria is also close to obtaining a World Bank $1.5 billion facility which will boost external reserves when it is disbursed.
- Nairametrics understands that the central bank might be required to devalue further and relax some of its capital controls if it is to receive the funds from the world bank.