Naira depreciates at black market as it nears N500/$1 after CBN devaluation

Wednesday, 26th May 2021: The exchange rate between the naira and the US dollar closed at N411.50/$1 at the Importers and Exporters window, where forex is traded officially.

The Naira appreciated against the US dollar on Wednesday at the official NAFEX window to close at N411.50 to a dollar. This represents a 0.01% gain when compared to N411.56/$1 recorded on Tuesday, 25th May 2021.

However, the Naira depreciated at the parallel market, closing at N493/$1 on Wednesday, May 26, 2021. This shows a N6 drop when compared to the N487/$1 that was recorded the previous day.

READ: Nigeria’s forex utilization falls 65% to $4.98 billion in Q1 2021

The Naira nears the N500/$1 mark at the black market after CBN’s devaluation of the local currency and despite a 262% increase in dollar supply.

The Central Bank of Nigeria moved towards exchange rate unification as it further adjusted the exchange rate and formally adopted the NAFEX rate as the official rate.

Trading at the official NAFEX window

Naira appreciated against the US dollar at the Investors and Exporters window on Wednesday to close at N411.50/$1, representing a 6 kobo gain when compared to the N411.56/$1 that was recorded the previous day.

• The opening indicative rate closed at N411.38 to a dollar, representing a 37 kobo drop when compared to the N411.01 to a dollar that it closed at on Tuesday, 25th May 2021.
• An exchange rate of N429.37 to a dollar was the highest rate recorded during intra-day trading before it settled at N411.50/$1. It also sold for as low as N387.67/$1 during intra-day trading.
• Forex turnover at the Investors and Exporters (I&E) window increased significantly by 261.6% on Wednesday, 26th May 2021.
• Data tracked by Nairametrics from FMDQ revealed that forex turnover rose from $130.50 million recorded on Tuesday, 25th May 2021 to $471.85 million on Wednesday, 26th May 2021.

READ: Exchange rate depreciates across forex markets despite increase in dollar supply

Cryptocurrency watch

The world’s biggest cryptocurrency, Bitcoin, is heading towards the $40,000 mark despite dropping by about 1.73% on Wednesday evening to close at $38,074.46, as cryptocurrencies continue to recover.

• Bitcoin was up 4.2% to trade at $40,500 on Wednesday morning, while Ethereum, the second-biggest cryptocurrency by market capitalization, was up roughly 9.4%, trading at $2,896.
• Earlier, Bitcoin prices had crashed when Tesla said it would stop accepting the crypto due to concerns about its high energy consumption.

• Ether, the coin linked to the Ethereum blockchain network, dropped by over 2.70% to close at $2,712.78 on Wednesday evening, dropping over $65 in the last 24 hours. Its trading volume also rose.

Crude oil price

Oil prices dropped by 0.29% on Wednesday with Brent crude closing at $68.67 as the Energy Information Administration (EIA) confirmed a draw at 1.7 million barrels for the week to May 21, a day after the American Petroleum Institute reported a minor crude draw.

• Oil traded near $70 a barrel following 4 days of gains as falling U.S. crude inventories add to evidence that energy demand is picking up.
• Oil prices had made a rebound earlier on Bullish Inventory Data by the American Petroleum Institute (API) on Tuesday, disclosing a draw in crude oil inventories of 439,000 barrels for the week ended May 21.

• WTI Crude dropped by 0.39% on Wednesday to close at $65.95, Bonny light rose by 0.67% to close at $67.33, while Natural Gas rose by 2.44% to close at $2.984.

External reserve

Nigeria’s external reserve plunged further by $7 million on Tuesday, 25th May 2021, to close at $34.287 billion.

• The nation’s foreign reserve declined from $34.294 billion recorded on Monday, 24th May 2021 to $34.287 billion on Tuesday, representing a 0.02% drop.
• Nigeria’s foreign reserve has dipped by $968.1 million since 16th April 2021, when the decline started, while year-to-date, the country’s reserve has dipped by about $1.087 billion.
• The decline in external reserve continues despite recent increases recorded in the crude oil market and the various policies by the apex bank aimed at boosting dollar inflow and remittances into the country.
• The decline could be attributed to reports of a drop in crude oil exports to India, the biggest buyer of Nigeria’s crude oil and a nation still heavily hit by the Covid-19 pandemic.