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.
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.
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- 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.
- 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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