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Currencies

Naira falls at black market, exchange rate hits N415.95 at NAFEX during trading

The exchange rate at the black market where forex is traded unofficially depreciated at N480/$1 and during the intraday trading at NAFEX.

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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 29, 2021, the exchange rate at the black market where forex is traded unofficially depreciated at N480/$1. The exchange rate at the parallel market closed at N478/$1 on the previous trading day of January 27, 2021.

On the flip side, the exchange rate between the naira and the dollar appreciated closing at N394.13/$1 at the NAFEX (I&E Window) where forex is traded officially.

However, during the intraday trading, the exchange rate traded for as high as N415.95/$1, the highest intraday trading tracked by Nairametrics.

READ: Naira falls at NAFEX window, report suggests CBN is expected to devalue naira by 10%

Why Naira is depreciating

  • The weakening of the local currency could be attributed to demand pressure and forex shortage as business activities pick up after a slow start at the beginning of the year.
  • Manufacturers in Nigeria in a report, have listed difficulty in having access to foreign exchange to pay for their imports as the biggest challenge they face.
  • The Central Bank of Nigeria is expected to devalue the naira by as much as 10% this year in the face of lingering dollar shortage in the country, according to a survey by Bloomberg.

READ: CBN to prevent exporters with unrepatriated export proceeds from banking services

The exchange rate disparity between the parallel market and the official market is about N85.87, representing a 21.8% devaluation differential.

To streamline forex 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.

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“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: Nigeria’s Qua Iboe crude exports resume as ExxonMobil lifts force majeure

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Trading at the official NAFEX window

The Naira appreciated marginally against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N394.13/$1. This represents a 20 kobo gain when compared to the N394.33/$1 that it closed on the previous trading day.

  • The opening indicative rate was N394.19 to a dollar on Thursday, representing a 19 kobo drop when compared with the N394 to a dollar that was recorded on Thursday, January 28, 2021.
  • The N415.95 to a dollar was the highest rate during intra-day trading before it closed at N394.13 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 35.9% on Friday, January 29, 2021.
  • According to the data tracked by Nairametrics from FMDQ, forex turnover declined further from $37.58 million on Thursday, January 28, 2021, to $24.09 million on Friday, January 29, 2021.

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

Oil price steady rise

Brent crude oil price hit about $55.07 on Monday 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.

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  • OPEC oil output has risen for a seventh month in January after the group and its allies agreed to ease record supply cuts further, although an involuntary drop in Nigeria’s exports has limited the increase.
  • OPEC and its allies agreed to pump more oil from January 1 and get back to output curb again in February amid fears of a slow demand recovery. This latest supply pact has helped oil to an 11-month high of above $57 a barrel this year.
  • 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 $36.395 million according to central bank data dated January 27, 2020.
  • This is a sign that higher oil prices and steady output levels may be contributing significantly to Nigeria’s foreign exchange position.

Higher oil prices drive up Nigeria’s external reserves

  • The external reserve has dropped to $36.395 billion as of January 27, 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 remains stable across forex market as dollar supply improves significantly by 430%

Naira remained stable against the US Dollar at the NAFEX window on Thursday to close at N410.50/$1.

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Naira value

Thursday,15th April 2021: The exchange rate between Naira and the US Dollar closed at N410.50/1$ in the Importers and Exporters window, where forex is traded officially.

Naira remained stable against the US Dollar at the NAFEX window on Thursday to close at N410.50/$1 as there was no movement when compared to the rate that was recorded on Wednesday, as dollar supply improves significantly by about 430%.

Also, the naira remained stable against the dollar for the third day at the parallel market on Thursday, 15th April 2021 to close at N482 to a dollar, the same rate that was recorded on Wednesday, April 14, 2021.

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 remained stable against the US Dollar at the Investors and Exporters window on Thursday to close at N410.50 to a dollar. This was the same rate that was recorded on Wednesday, 14th April 2021.

  • The opening indicative rate closed at N410.50 to a dollar on Thursday. This represents an 86 kobo drop when compared to N409.64/$1 recorded on Wednesday.
  • Also, an exchange rate of N437.62 to a dollar was the highest rate recorded during intra-day trading before it closed at N410.50/$1. It also sold for as low as N392/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window rose significantly by 429.93% on Thursday, 15th April 2021.
  • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover increased from $21.92 million recorded on Wednesday, April 14, 2021, to $116.16 million on Thursday, April 15, 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, went up by over 1% to close at $63,441 on Thursday evening as most investors still think it is a bubble.

  • Bitcoin had crossed the $64,000 mark on Wednesday after it traded past the $63,000 mark the previous day for the first time.
  • The Co-Founder and Managing Director of Nexo, Antoni Trenchev, had said that Bitcoin could hit $100,000 in the next 12 to 18 months.

Oil price gain

Brent crude oil price went up slightly on Thursday to close at $66.83 per barrel, indicating a 0.3% increase compared to $66.63 recorded at the close of trade on Wednesday as it trades at a one-month high.

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  • Oil extended its climb out of a month-long trading range with further signs of an accelerating rebound taking shape in the U.S.
  • Oil remains firmly above its most recent trading range, where it had been stuck near $60 a barrel since mid-March as some regions faced a resurgence in virus cases. Continued signs of a stronger U.S. market are also pushing prices higher.
  • Brent Crude closed at $66.83 (+0.38%), WTI Crude closed at $63.46 indicating 0.49% gain, Bonny Light, $64.79 (+3.56%), OPEC Basket (+2.46%) to close at $63.39 while Natural gas rose by 1.53% to close at $2,658

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

External reserve

Nigeria’s external reserve gained about $27 million on Wednesday, 14th April 2021 to close at $35.199 billion, being the highest external reserve position recorded in over a month.

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  • This indicates a 0.08% increase when compared to $35.172 billion recorded on Tuesday, 13th April 2021.
  • It also represents an increase in the country’s external reserve position for the 17th consecutive day, having endured a significant downturn earlier in the year. Nigeria’s reserve has added a total of about $783 million in 17 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 CBN sells forex to foreign investors, first in 2021

Naira appreciated against the US Dollar at the NAFEX window on Wednesday to close at N410.50/$1.

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Wednesday,14th April 2021: The exchange rate between Naira and the US Dollar closed at N410.50/1$ in the Importers and Exporters window, where forex is traded officially.

Naira appreciated against the US Dollar at the NAFEX window on Wednesday to close at N410.50/$1. This represents a 0.12% gain when compared to N411/$1 recorded on Tuesday, as the Central Bank of Nigeria in its first sale, in 2021, to foreign investors seeking to repatriate their funds abroad, sold $20 million to them according to Reuters.

Meanwhile, the naira remained stable against the dollar for the second day at the parallel market on Wednesday, 14th April 2021 to close at N482 to a dollar, the same rate that was recorded on Tuesday, April 13, 2021.

READ: Naira falls at NAFEX window as Bitcoin rises above $63,000, an all-time record high

Trading at the official NAFEX window

Naira appreciated against the US Dollar at the Investors and Exporters window on Wednesday to close at N410.50 to a dollar. This represents a 50 kobo gain when compared to N411/$1 recorded on Tuesday, 13th April 2021.

  • The opening indicative rate closed at N409.64 to a dollar on Wednesday. This represents a 6 kobo drop when compared to N409.58/$1 recorded on Tuesday.
  • Also, an exchange rate of N422 to a dollar was the highest rate recorded during intra-day trading before it closed at N409.64/$1. It also sold for as low as N392/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window dropped significantly by 59.05% on Wednesday, 14th April 2021.
  • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover declined from $53.53 million recorded on Tuesday, April 13, 2021, to $21.92 million on Wednesday, April 14, 2021.

READ: Naira gains at NAFEX window despite 26.2% drop in dollar supply

Cryptocurrency watch

The world’s most popular digital currency, bitcoin, reached another all-time high on Wednesday, touching $64,717.01 before coming down to $62,298.51 as of Wednesday evening ahead of Coinbase’s historic stock market listing in New York.

  • Bitcoin, which has been up and down over the last few weeks, crossed $64,000 on Wednesday after it had just yesterday, crossed the $63,000 mark for the first time.
  • The rally has come in anticipation of cryptocurrency exchange Coinbase’s hotly tipped US stock market listing.
  • Earlier on Wednesday, the price of Dogecoin, recorded a new milestone as it went up by 54%, establishing a new all-time high of $0.1161.
  • Meanwhile, Coinbase, a Cryptocurrency exchange, finally made its highly anticipated debut on Nasdaq on Wednesday, April 14, 2021, becoming the first company devoted entirely to cryptocurrency to enter the US stock exchange with a $100 billion valuation.

READ: Naira remains flat as external reserve fall to just 6 months of imports

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Oil price gain

Brent crude oil price jumped on Wednesday to close at $66.63 per barrel, indicating a 3.98% increase compared to $64.08 recorded at the close of trade on Tuesday as the Energy Information Administration (EIA) reports crude draw.

  • The EIA in its report said that crude oil inventories had shed 5.9 million barrels in the week to April 9, compared with an inventory draw of 3.5 million barrels reported for the previous week.
  • The EIA’s inventory estimate comes a day after the American Petroleum Institute reported a 3.6-million-barrel inventory draw in crude oil for the same period but a 5.565-million-barrel build in gasoline stocks, which prevented oil prices from swinging significantly up or down.
  • The oil rally can also be attributable to the picking up of US oil demand as economic expansion quickens. The West Texas Intermediate (WTI) crude futures surged more than 5% on Wednesday and broke out the narrow trading range they had been stuck in since mid-March.
  • Morgan Stanley, meanwhile, said in a new note that it expected prices to remain range-bound through the end of the summer, at between $65 and $70 per barrel for Brent.
  • Brent Crude closed at $66.63 (+4.65%), WTI Crude closed at $63.18 indicating 4.99% gain, Bonny Light, $62.56 (+0.58%), OPEC Basket (+0.67%) to close at $61.87 while Natural gas declined by 0.08% to close at $2,617

External reserve

Nigeria’s external reserve gained about $34 million on Tuesday, 13th April 2021 to close at $35.172 billion, being the highest external reserve position recorded in over a month.

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  • This indicates a 0.1% increase when compared to $35.138 billion recorded on Monday, 12th April 2021.
  • It also represents an increase in the country’s external reserve position for the 16th consecutive day, having endured a significant downturn earlier in the year. Nigeria’s reserve has added a total of about $756 million in 16 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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