Naira crashes to record low at NAFEX as low dollar supply persists

The exchange rate between the naira and the US Dollar closed at N411.63/$1, a 3 months record low, at the Investors and Exporters window on Tuesday.

Naira depreciated against the US Dollar on Tuesday as it closed at N411.63 to a dollar at the NAFEX window, representing a 0.59% drop when compared to N409.2 recorded on the previous trading day.

Meanwhile, the naira appreciated against the dollar to close at N480/$1 on Tuesday, March 2, 2021. This represents a N2 gain when compared with the N482/$1 that it closed on the previous trading day.

Although forex turnover at the Investor and Exporters (I&E) window rose by 142.7% from $24.38 million recorded on Friday to $59.17 million on Tuesday, March 2, 2021, the dollar supply still remains low.

Trading at the official NAFEX window

The Naira depreciated against the US Dollar at the Investors and Exporters window on Tuesday to close at N411.63/$1. This represents a N2.43 drop when compared to N409.2 recorded on the previous trading day.

• The opening indicative rate closed at N410.11 to a dollar on Tuesday. This represents an 81kobo drop when compared to N409.3/$1 recorded on Monday.
• Also, an exchange rate of N415 to a dollar was the highest rate during intra-day trading before it closed at N411.63/$1. It also sold for as low as N388.25/$1 during intra-day trading.
• Forex turnover at the Investor and Exporters (I&E) window rose by 142.7% on Tuesday, March 2, 2021.
• According to the data tracked by Nairametrics from FMDQ, forex turnover increased from $24.38 million recorded on Monday, March 1, 2021, to $59.17 million on Tuesday, March 2, 2021.

Cryptocurrency watch

The world’s largest cryptocurrency, Bitcoin dropped on Tuesday to close at $48,814.26 compared to its previous closing of $49,629.33.

• The highly volatile digital asset has risen 76% from the year’s low of $27,734 recorded on the 4th of January 2021.
• The world’s biggest and best-known cryptocurrency has however fallen by 16.3% from the year’s high of $58,354 recorded on the 21st of February 2021.
• Meanwhile, Ether ETH=BTSP, the coin linked to the ethereum blockchain network, dropped by 3.95% to $1,520.66 on Tuesday.

Oil price decline

Brent Crude oil dropped $0.95 on Tuesday to close at $63.01 representing a 1.5% decline when compared to $63.96 recorded on the previous trading day.

• The oil price rally had stumbled on the uncertainty surrounding OPEC+ and a stronger dollar.
• Besides the obvious factors that affect oil prices, such as the upcoming OPEC+ meeting that could result in an agreement to boost production, which would dampen prices, there was one new factor, the potential for worsening U.S.-Saudi relations.
• This is coming after the Biden administration released a report that implicated the Saudi Government in the murder of Journalist, Jamal Khashoggi which could negatively affect US-Saudi relations.
• Meanwhile, Analysts are expecting next week’s meeting of OPEC and its allies to result in more supply returning to the market as the oil prices rally over $60 per barrel.
• WTI Crude closed at $59.97 (0.37%), OPEC Basket $64.24 (-0.20%), Bonny Light $62.71 (-1.95%), and Natural Gas (+0.04%).

External reserve dips to lowest in two months

Nigeria’s external reserve continued its decline as it dropped by 0.29% to stand at $34.998 billion as of March 1, 2021, compared to $35.1 billion recorded as of February 26, 2021.

• This represents the lowest external reserve position Nigeria has recorded in over two-months when it stood at $34.98 billion as of 24, December 2020.
• It is also worth noting that Nigeria lost over $1.2 billion in external reserves in the month of February.
• According to data obtained from the Central Bank of Nigeria (CBN), external reserves declined from $36.3 billion as of 29th of January 2021 to $35.1 billion as of 26th of February 2021.
• The decline in Nigeria’s external reserve has persisted in the month of February, despite rallying oil prices in the month. This is a cause for worry, as Nigeria will hope to boost its reserve in order to meet up with its accumulated needs, hindered by the crash in oil prices earlier in 2020.