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

On January 18, 2021, the exchange rate between the naira and the dollar appreciated closing at N393.83/$1 at the NAFEX (I&E Window) where forex is traded officially.

This is as Nigeria’s external reserves added $1 billion in 15 days to rise to $36.3 billion.

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.

READ: CBN Governor says Nigeria’s external reserves sufficient to cover 7-months import

This is as the Central Bank of Nigeria sustains its intervention across the foreign exchange markets to meet the needs of manufacturers and end-users who need dollars for their medical trips, school fees payments, travel allowances, and others.

The apex bank has also resumed its dollar sales to Bureau De Change operators.

The exchange rate disparity between the parallel market and the official market is about N81.17, representing a 16.9% devaluation differential.

READ: CBN considers interest rate cut as trade, economy decline over Coronavirus

The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N393.83/$1. This represents an 84 kobo gain when compared to the N394.67/$1 that it closed on the previous trading day.

• The opening indicative rate was N394.07 to a dollar on Monday, representing a 95 kobo drop when compared to the N393.12 that was recorded on Friday, January 15, 2021.
• The N415.76 to a dollar was the highest rate during intra-day trading before it closed at N393.83 to a dollar. It also sold for as low as N388/$1 during intra-day trading.
• Forex turnover at the Investor and Exporters (I&E) window increased by 71.2% on Monday, January 18, 2021.
• According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $40.31 million on Friday, January 15, 2021, to $69 million on Monday, January 18, 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: Nigeria’s External Reserves drop by $2.9 billion, hit 10-month low 

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.

READ: Nigeria’s external reserve drop by $261 million in 15 days, oil firms to sell forex to CBN 

Nigeria rising external reserves

• The external reserve has risen to $36.3 billion as of January 15, 2021, suggesting that the government may have taken receipt of the $1-1.5 billion World Bank Loan.
• The external reserves have increased by  $1 billion since December 31, 2020, when it closed the year at $35.3 billion.
• The unification of the exchange rate was previously cited as a major requirement for receiving the world bank facility.
• 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.