Naira gains at NAFEX window despite low liquidity in forex market

Monday, 29th March 2021, the exchange rate between the naira and the US Dollar closed at N409.13/$1 at the Investors and Exporters window.

Naira appreciated against the US Dollar on Monday, 29th March 2021 after gaining for 2 consecutive days at the NAFEX window to close at N409.13 to a dollar despite very low dollar supply.

This represents a 0.21% gain, when compared to N410/$1 recorded on Friday, 26th March 2021.

However, the naira remained stable at the parallel market, as it closed at N485/$1, this was the same rate that was recorded on the previous trading day.

READ: Naira gains at NAFEX window as external reserve plunges $1.1 billion in less than a month

Trading at the official NAFEX window

Naira appreciated against the US Dollar at the Investors and Exporters window on Monday to close at N409.13/$1. This represents an 87 kobo gain when compared to N410/$1 recorded on Friday, 26th March 2021.

• The opening indicative rate remained stable to close at N409.17 to a dollar on Monday. This was the same rate that was recorded on Friday.
• Also, an exchange rate of N410.50 to a dollar was the highest rate recorded during intra-day trading before it closed at N409.13/$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 57.4% on Monday, 29th March 2021.
• A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover declined from $72.43 million recorded on Friday, March 26, 2021, to $30.84 million on Monday.

READ: Naira 4 Dollar: Nigerians in diaspora remit $40 million in one week

Cryptocurrency watch

Bitcoin, the most priced and popular cryptocurrency in the world gained 3.22% on Monday evening to trade above $57,623 following more news of potential mainstream financial adoption of cryptocurrencies by major players.

• Visa had said it will allow the use of the cryptocurrency USD Coin to settle transactions on its payment network.
• Ethereum also gained 7.29% to trade at $1,815.13 as of Monday night.
• Large firms including Mastercard, Paypal and BlackRock have started using some digital coins in recent months.
• Currency watchers have speculated that this is part of the reason for Bitcoin’s recent meteoric rise.

READ: Computers might steal Satoshi Nakamoto’s Bitcoin fortune

Oil price rebound continues

Oil price increase continued on Monday with the focus moving towards OPEC+ meeting.

• Brent Crude as of Monday evening traded at $65.07 per barrel as OPEC+ is scheduled to hold a meeting this week to decide on its output policy for May.
• While multiple factors may impact the group’s decision, the markets already priced in an expected rollover of current cuts through May.

• The closure of the Suez Canal led to a moderate price rally last week, which came after a significant decline in oil prices triggered by new and stringent lockdowns in Europe.
• The impact of the Suez Canal crisis on oil markets has been marginal due to a number of factors which include: slowing demand especially in the EU, relatively high inventory figures and the low volumes of crude oil passing through the canal (less than 5% of global supply).
• Brent crude gained about 0.77% during intra-day trading on Monday while WTI Crude rose by 0.97% during the same period.
• Brent ($65.07), WTI crude ($61.56), Bonny Light ($63.00), OPEC Basket ($62.56), and Natural Gas ($2.586).

READ: Naira falls at NAFEX window as oil prices rally above $60 and bitcoins blast past $44k

External reserve increase continues for the 5th consecutive day

Nigeria’s external reserve increased by 0.06% on Friday 26th, March 2021 to stand at $34.67 billion.

• This represents the sixth consecutive day increase, gaining a total of $230 million from $34.42 billion recorded as of March 18, 2021, to $34.67 billion as of 26th March 2021.
• Nigeria’s reserve had lost about $980 million year-to-date before recording increases in the past six days, which indicates that the recent oil price rally is beginning to reflect in the country’s external reserve.
• It is important for Nigeria that the increase continues as it will help the Central Bank stabilise the exchange rate against other currencies and meet up with pent-up obligations due to the lockdown embarked on in 2020.