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Currencies

Naira gains at black market as external reserves improves on higher oil prices

The exchange rate at the black market where forex traded unofficially appreciated at N478/$1.

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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 27, 2021, the exchange rate at the black market where forex is traded unofficially, saw an appreciation to N478/$1. The exchange rate at the parallel market closed at N480/$1 on the previous trading day of January 26, 2021, representing a N2 gain.

Why Naira is appreciating

  • This can be attributed to moderate demand for dollars in the face of tight liquidity in the foreign exchange market.
  • The CBN has also suggested that the dramatic improvement in the country’s external reserve is due to an increase in global crude oil prices. This has increased the capacity of the apex bank to intervene in the foreign exchange market.

READ: Non-oil sector is critical to Nigeria’s economic recovery in 2021 – Cordros Capital

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, a general increase in prices and decline in economic activities.”

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

Trading at the official NAFEX window

The Naira depreciated marginally against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N394.25/$1. This represents a 25 kobo drop when compared to the N394/$1 that it closed on the previous trading day.

  • The opening indicative rate was N394.06 to a dollar on Wednesday, representing a 46 kobo drop when compared with the N393.60 to a dollar that was recorded on Tuesday, January 26, 2021.
  • The N396 to a dollar was the highest rate during intra-day trading before it closed at N394.25 to a dollar. It also sold for as low as N385/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window dropped by 52.45% on Wednesday, January 27, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover declined from $108.34 million on Tuesday, January 26, 2021, to $51.51 million on Wednesday, January 27, 2021.

READ: FG posts 27% revenue shortfall in 2020 as budget deficit hit N6.1 trillion

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Oil price steady rise

Brent crude oil price hit about $55.81 on Thursday 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 a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.

READ: Oil prices drop amid delay in $900 billion economic stimulus package

Higher oil prices drive up Nigeria’s external reserves

  • The external reserve has dropped for the first time in about 5 weeks to $36.431 billion as of January 26, 2021. However, this is a huge improvement on the $35.373 billion that it was as of December 31, 2020.c
  • 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.

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

    Naira gains at black market as external reserves increases by $620 million in 2 weeks

    The opening indicative rate closed at N410.88 to a dollar on Monday.

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    on

    Naira’s true worth,Naira gains on the dollar for the first time since March, Naira forwards hit record high as it crashes to N420/dollar in the parallel market, Naira hits N500 to $1 at the forward market, Naira hits N509 to the dollar at forwards market, demand for the U.S dollar climbs up, Naira hits $387.35 to $1 at currency spot market , Naira sells at N456, Nigeria’s Foreign Reserves drop by over $3 billion in Q1 2020, Investors and Exporters (I&E) window, Naira gains against the dollar, CBN close in on currency speculators

    Monday,12th April 2021: The naira appreciated against the dollar at the parallel market on Monday, 12th April 2021 to close at N482 to a dollar. This represents a N3 gain when compared to the N485/$1 that was recorded on Friday, April 9, 2021.

    Meanwhile, the exchange rate between Naira and the US Dollar closed at N409.75/1$ in the Importers and Exporters window, where forex is traded officially.

    Naira depreciated against the US Dollar at the NAFEX window on Monday to close at N409.75/$1. This represents a 0.18% drop when compared to N409/$1 recorded on Friday, as the country’s external reserve increased by $620 million in 2 weeks.

    READ: Naira strengthens at NAFEX window as bitcoin slumps to $52k

    Trading at the official NAFEX window

    Naira depreciated against the US Dollar at the Investors and Exporters window on Monday to close at N409.75 to a dollar. This represents a 75 kobo drop when compared to N409/$1 recorded on Friday, 9th April 2021.

    • The opening indicative rate closed at N410.88 to a dollar on Monday. This represents a N1.09 drop when compared to N409.79/$1 recorded on Friday.
    • Also, an exchange rate of N420 to a dollar was the highest rate recorded during intra-day trading before it closed at N409.75/$1. It also sold for as low as N400/$1 during intra-day trading.
    • Forex turnover at the Investor and Exporters (I&E) window dropped by 17.9% on Monday, 12th April 2021.
    • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover declined from $55.21 million recorded on Friday, April 9, 2021, to $45.35 million on Monday, April 12, 2021.

    READ: Naira appreciates at NAFEX as Nigeria’s external reserve is set to get a boost

    Cryptocurrency watch

    The world’s most popular digital currency, bitcoin, rose by as much as 2.6% to $61,229 on Monday, nearing an all-time high as bullish sentiment gathered steam ahead of listing by the largest US cryptocurrency exchange.

    • The cryptocurrency is up almost nine times in the past year, a return that towers above that of more familiar assets like equities or bullion.
    • Against the backdrop of Wall Street’s growing embrace of crypto, the direct listing of digital-token exchange Coinbase Global Inc. is generating a lot of interest.
    • Coinbase is moving towards a $100 billion valuation as it is due to go public on the Nasdaq on April 14, the first listing of its kind for a major cryptocurrency company and a test of investor appetite for other start-ups in the sector.
    • The digital currency has been widely adopted by many, replacing gold as the global digital-reserve asset.
    • Meanwhile, exchange tokens, such as Binance Coin, are seeing their value rise ahead of Coinbase’s public debut as well. Binance Coin, known as BNB, rose 23% on Monday, according to CoinMarketCap.com. Huobi Token and KuCoin Token, among others, also gained.

    READ: Best performing mining, industrial and consumer goods stocks from last week

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    Oil price gain

    Brent crude oil price rose on Monday evening as it closed at $63.34 per barrel, indicating a 0.51% increase compared to $63.02 recorded at the close of trade on Sunday on expectations of strong economic recovery.

    • Oil prices recorded an increase early on Monday, with WTI Crude topping $60 a barrel for the first time in a week after the Federal Reserve Chairman, Jerome Powell, said that the outlook on the U.S. economy had brightened substantially.
    • A weaker U.S. dollar also added to investors’ appetite for crude, while another claim from the Yemeni rebel group, the Houthis that they had targeted oil facilities of Aramco in Saudi Arabia further supported prices.
    • Saxo Bank analysts said that the prospect for stronger economic growth helped to offset the impact of a resurgent coronavirus just as OPEC+ prepares to ease production cuts.
    • Brent Crude closed at $63.34 (+0.09%), WTI Crude closed at $59.75 indicating 0.08% gain, Bonny Light, $62.20 (+1.06%), OPEC Basket (-0.13%) to close at $61.14 while Natural gas dropped by 0.27% to close at $2.554.

    External reserve

    Nigeria’s external reserve gained $30 million on Friday, 9th April 2021 to close at $35.036 billion, being the highest external reserve position recorded in over a month.

    • This indicates a 0.09% increase when compared to $35.006 billion recorded on Thursday, 8th April 2021.
    • It also represents an increase in the country’s external reserve position for the 14th consecutive day, having endured a significant downturn earlier in the year. Nigeria’s reserve has added a total of about $620 million in 14 days.
    • This recent increase in Nigeria’s external reserve could however be attributed to the increase in crude oil prices recorded earlier in March before the recent bearish trade in the crude market.
    • It could be attributed to the possible increase in diaspora remittance as the CBN offers incentives for every unit of a dollar received in Nigeria from diaspora remittance.
    • The external reserve is likely to get a further boost, as the Federal Government recently announced plans to issue $500 million Eurobonds for 2021.

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    Currencies

    Naira appreciates at NAFEX as Nigeria’s external reserve is set to get a boost

    Naira gained against the US Dollar at the NAFEX window on Friday to close at N409/$1.

    Published

    on

    Naira falls across forex markets as businesses resume after public holidays

    Friday, 9th April 2021: The exchange rate between Naira and the US Dollar closed at N409/1$ in the Importers and Exporters window, where forex is traded officially.

    Naira gained against the US Dollar at the NAFEX window on Friday to close at N409/$1. This represents a 0.16% gain when compared to N409.65/$1 recorded on Thursday, as the country’s external reserve is set to receive a boost with the planned issuance of $500 million Eurobonds.

    Meanwhile, the naira maintained stability at the parallel market on Friday, 9th April, 2021 to close at N485 to a dollar, the same rate as maintained since last week.

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

    Trading at the official NAFEX window

    Naira appreciated against the US Dollar at the Investors and Exporters window on Friday to close at N409 to a dollar. This represents a 65 kobo gain when compared to N409.65/$1 recorded on Thursday, 8th April 2021.

    • The opening indicative rate closed at N409.79 to a dollar on Friday. This represents a 71 kobo gain when compared to N410.50/$1 recorded on Thursday.
    • Also, an exchange rate of N420 to a dollar was the highest rate recorded during intra-day trading before it closed at N409/$1. It also sold for as low as N395/$1 during intra-day trading.
    • Forex turnover at the Investor and Exporters (I&E) window dropped by 41.1% on Friday, 9th April 2021.
    • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover declined from $93.69 million recorded on Thursday, April 8, 2021, to $55.21 million on Friday, April 9, 2021.

    READ: Naira gains at NAFEX as oil prices record biggest single day loss in 11 months

    Cryptocurrency watch

    The world’s most popular digital currency, bitcoin recorded a 3.05% increase in value on Saturday evening, 10th April 2021.

    • Bitcoin went up by 3.05% to trade at $59,907 on Saturday evening, compared to $58,135 recorded at the close of trade on Friday.
    • This is coming after it had risen to $61,222.22 on Saturday, its highest in nearly a month, propelled by talks of constrained new supplies against evidence of wider adoption.
    • Bitcoin (BTC) is up 116% from the year’s low of $27,734 on January 4. It crossed the $60,000 mark for the first time on March 13, hitting a record $61,781.83 on Bitstamp exchange, just after U.S. President Joe Biden signed his $1.9 trillion fiscal stimulus package into law.
    • The digital currency has been widely adopted by many, replacing gold as the global digital-reserve asset.

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

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    Oil price gain

    Brent crude oil price declined on Sunday evening as it closed at $63.02 per barrel, indicating a 0.28% drop compared to $63.2 recorded at the close of trade on Friday.

    • This is as the fall in oil prices especially towards the end of last week can be attributed to demand concerns and Covid-19 lockdowns in some major economies, due to a spike in infections.
    • The Russian government has said that the coronavirus pandemic could continue to impact on global oil demand until 2024.
    • Crude oil prices had recorded a marginal increase during the week despite the decision of the OPEC+ to ease production cuts in the coming months. However, US Shale Giant has commended the OPEC+ group for bringing supply and demand back to balance.
    • Brent Crude closed at $63.02 (+0.11%), WTI Crude closed at $59.39 indicating 0.12% gain, Bonny Light, $61.55 (+0.46%), OPEC Basket (+0.89%) to close at $61.22 while Natural gas gained 0.67% to close at $2.543.

    External reserve

    Nigeria’s external reserve gained $29 million on Thursday, 8th April 2021 to close at $35.006 billion, being the highest external reserve position recorded in over a month.

    • This indicates a 0.08% increase when compared to $34.977 billion recorded on Wednesday, 7th April 2021.
    • It also represents an increase in the country’s external reserve position for the 13th consecutive day, having endured a significant downturn earlier in the year. Nigeria’s reserve has added a total of about $590 million in 13 days.
    • This recent increase in Nigeria’s external reserve could however be attributed to the increase in crude oil prices recorded earlier in March before the recent bearish trade in the crude market.
    • It could be attributed to the possible increase in diaspora remittance as the CBN offers incentives for every unit of a dollar received in Nigeria from diaspora remittance.
    • The external reserve is likely to get further boost as the Federal Government recently announced plans to issue $500 million Eurobonds for 2021.

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