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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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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

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.

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 falls against US dollar as CBN extends Naira4dollar scheme indefinitely

    The exchange rate between the naira and the US dollar, closed at N411/$1 at the I&E Window.

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    Thursday, 6th May 2021: The exchange rate between the naira and the US dollar, closed at N411/$1 at the Importers and Exporters window, where forex is traded officially.

    Naira fell against the US dollar to close at N411 to a dollar on Thursday, 6th May 2021, representing a 50 kobo decline when compared to N410.5/$1 that was recorded on Wednesday, 5th May 2021.

    Meanwhile, the naira maintained stability at the parallel market as it closed at N485/$1, while Nigeria’s external reserve plunged $28.94 million to close at $34.76 billion on Wednesday, 5th May 2021.

    Also, the apex bank issued an indefinite extension to its Naira4dollar scheme for foreign remittances, which was introduced some months ago. This is aimed at sustaining the country’s foreign exchange market liquidity.

    READ: Naira gains at NAFEX window as dollar supply improves by 305%

    Trading at the official NAFEX window

    The naira depreciated against the US dollar at the Investors and Exporters window on Thursday to close at N411/$1, representing a 50 kobo decline when compared to the N410.5/$1 that was recorded on Wednesday.

    • The opening indicative rate closed at N410.37 to a dollar on Thursday, 6th May 2021, representing a 12 kobo depreciation when compared to the N410.25/$1 recorded on Wednesday.
    • Also, an exchange rate of N420.9 to a dollar was the highest rate recorded during intra-day trading before it settled at N411/$1. It, however, sold for as low as N400/$1 during intra-day trading.
    • Forex turnover at the Investor and Exporters (I&E) window declined by 38.4% on Thursday, 6th May 2021.
    • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover decreased from $172.52 million recorded on Wednesday, 5th May 2021 to $106.34 million on Thursday, 6th May 2021.

    READ: Exchange rate depreciates at NAFEX window as Bitcoin slumps by over 5%

    Cryptocurrency watch

    Bitcoin, the world’s most popular cryptocurrency, slumped by 2% on Thursday to trade at $56,358.03.

    • As of 11:31 pm on Thursday, the highly valued cryptocurrency asset witnessed a decline despite soaring as high as 5.5% on Wednesday.
    • However, Ethereum recorded a marginal growth of 0.07% to close at $3,530.75, capitalising on the 9.1% gain recorded in the previous day.
    • The total crypto market capitalisation depreciated by 0.53% to close at $2.33 trillion on Thursday.
    • Meanwhile, payments giant, Visa and financial services provider TALA have partnered to boost cryptocurrency adoption in emerging markets.
    • This partnership is aimed at easing the process of converting, storing and using cryptocurrencies by the underbanked consumers.

    READ: Naira depreciates as dollar sales top $100m a day at I&E window

    Crude oil price stalls

    Crude oil prices witnessed a bearish trading session on Thursday, 6th May 2021 as the oil price rally stalled due to the worsening covid-19 crisis in India.

    • Brent Crude dipped by 0.97% on Thursday to close at $68.29 compared to its closing price of $68.96 recorded at Wednesday’s trading session.
    • The decline in oil prices, which cut short the rally to $70 a barrel was due to a fresh record of new daily coronavirus cases reported by the third-largest importer of oil in the world.
    • Also, according to energy analytics firm OilX, China’s crude oil imports fell by 11% in April 2021 to stand at 10.41 million barrels per day.

    External reserve

    Nigeria’s external reserve plunged for the 12th consecutive day on Wednesday, 5th May 2021 as it dipped $28.91 million to close at $34.76 billion.

    • The nation’s foreign reserve declined from $34.79 billion recorded as of Tuesday, 4th May 2021 to $34.76 billion on Wednesday, representing a 0.28% decline.
    • Nigeria’s foreign reserve has dipped $497.36 million since 16th April 2021 to date.
    • Nigeria will hope to boosts its foreign reserve position as oil prices continue to rally high and the CBN intensified effort to encourage dollar remittances into the country.

    Continue Reading

    Currencies

    How rise in oil prices will impact exchange rate

    Oil prices are currently inching closer to $70 per barrel as the positive outlook of a return to global economic recovery swells investor sentiments.

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    on

    Crude oil prices rebound ease investors’ concerns for Nigeria debt market, How substantial is compliance for the Oil market?, Crude Oil price soars high on new COVID-19 vaccine

    Nigeria, Africa’s top oil producer and home to the second-largest reserves on the continent, is expected to benefit from the rise in oil prices in many ways.

    Oil prices are currently inching closer to $70 per barrel as the positive outlook of a return to global economic recovery swells investor sentiments.

    Historically, there has been a strong positive correlation between crude oil prices and the performance of the Nigerian economy. For example, when oil prices plummeted due to the COVID-19 outbreak and the implementation of lockdown protocols in 2020, the Nigerian government scaled down the budget to align better with the drop in crude oil price.

    Now that there is a surge in oil price, we should expect that there would be an increase in government revenue translating to a stirring-up of aggregate demand.

    READ: Nigeria records highest trade deficit since 1981

    Why oil price is rising

    The OPEC+ output restrains, despite the strong recovery of oil consumption, continues to give formidable fitting to bullish sentiments about soaring oil prices.

    • Oil prices are rising as optimism about a strong rebound in fuel demand in developed countries overshadows concerns of full lockdown to curb covid-19 in India.
    • Oil (BRENT) has seen a 34.3% increase Year to Date with the oil price at $69.34 showing an increase of +1.15% as of the time of writing this article.

    What it means for the exchange rate

    Perhaps the greatest benefit of the recent oil price rise is exchange rate stability. Since the crash in oil prices began in late 2019, Nigeria’s official currency has faced a barrage of sell pressure as local and foreign investors increase demand for the dollar.

    This forced the central bank to curtain demand, implementing various forms of capital controls across the economy. With oil prices on the rise, Nigerians can begin to expect the following:

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    • An increase in government revenue, which also means higher dollar earnings and thus increased FX reserves. Nigeria’s FX reserve reportedly stands at $34.7 billion as of Tuesday, May 4th, 2021. Soaring oil prices strengthen the exchange rate and promote economic growth. This effect trickles down to higher reserves held by the CBN meant for stabilization of the currency.
    • Higher oil prices could also mean a more stable economy thus propelling economic growth. This, in turn, attracts foreign investor dollars or at least retains what we already have and reduces the pressure on demand.
    • Nigerians have intensified diversifying their currency holdings, keeping less of naira and holding more dollars as they hedge against depreciation. This has kept the pressure on the exchange rate over the last one and a half years. This trend could reverse if oil prices continue their steady rise.

    READ: Dangote: Cement price from our factories is between N2,450 and N2,510 per bag, VAT inclusive

    The implication? The parallel market exchange rate might appreciate closer to the NAFEX rate if this trend continues.

    Hence, it is safe to presume that as the world resume business and travel activities, the demand for Black Gold will continue to increase, and with supply held steady by OPEC+ we can speculate that this is enough catalyst to relieve the pressure of FX demand and increase our foreign reserves thereby propelling growth.

    However, the inclusivity of this growth may still be in question.

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