Naira depreciates at official window as dollar supply drops significantly by 58.5%

Tuesday, 8th June 2021: The exchange rate between the naira and the US dollar closed at N411.50/$1 at the official Investors and Exporters window.

Naira depreciated against the US dollar on Tuesday to close at N411.50 to a dollar, representing a 0.1% loss compared to N411.07/$1 recorded on Monday, 7th June 2021.

However, the naira remained stable against the US dollar on Tuesday at the parallel market to close at N502 to a dollar. This was the same rate that was recorded on Monday, June 7, 2021.

The dollar supply dropped significantly by 58.5% as panic buying and speculation persists in the forex market.

Trading at the official I&E window

Naira depreciated against the US dollar at the I&E window on Tuesday, June 8, 2021, to close at N411.50/$1. This represents a 43 kobo drop when compared with the N411.07/$1 recorded the previous day.

• The opening indicative rate closed at N410.95/$1 on Tuesday, representing a 13 kobo gain when compared with the N411.08/$1 recorded on Monday, 7th June 2021.
• An exchange rate of N421.96 to a dollar was the highest rate recorded during intra-day trading before it closed at N411.50/$1, while it also sold for as low as N400/$1 during intra-day trading.
• Forex turnover at the Investors and Exporters (I&E) window dropped by 58.5% on Tuesday, June 8, 2021.
• Data tracked by Nairametrics from FMDQ revealed that forex turnover declined from $151.37 million recorded on Monday, 7th June 2021 to $62.79 million on Tuesday, 8th June 2021.

Cryptocurrency watch

The world’s biggest and most popular cryptocurrency, Bitcoin, declined by 0.79% on Tuesday evening to close at $32,854.31 as it slumped to a 2-week low.

• Cryptocurrency prices have slid further into the red amid concerns that government authorities have more power over digital coins than previously thought.
• Bitcoin’s price has hit a two-week low, while two of the largest digital currencies, Ethereum and Ripple, have dropped by 35 per cent and roughly 50 per cent compared to a month ago.
• Recent news that the FBI had recovered most of the Bitcoin ransom paid to the Colonial Pipeline hackers has led investors to question just how decentralised and outside of government control cryptocurrency really is.
• Meanwhile, comments made by former US President, Donald Trump, that Bitcoin is a scam and another currency competing against the [US] dollar, have further fed uncertainty about the digital asset’s future.
• Ethereum dropped by 3.91% on Tuesday evening to close at $2,423.95.

READ: Naira depreciates at NAFEX window, diaspora remittances to hit $22 billion

Crude oil price

Crude oil price climbed past the $72 mark with Brent crude closing at $72.68 per barrel as the American Petroleum Institute (API) report reinforces optimism around demand recovery.

• The API on Tuesday reported another draw in crude oil inventories of 2.108-million barrels for the week ending June 4. Analysts had predicted a draw of 2.036 million barrels for the week.
• Oil prices rose on Tuesday, settling at the highest in more than two years after the top U.S. diplomat said that even if the United States were to reach a nuclear deal with Iran, hundreds of U.S. sanctions on Tehran would remain in place. That could mean additional Iranian oil supply would not be re-introduced into the market soon.
• According to the latest data from the Energy Information Administration (EIA), while crude oil inventories fell yet again this week, U.S. oil production fell to an average of 10.8 million BPD for the week ending May 28, down 200,000 BPD from the week prior.
• Also, restraint on supply by the Organization of the Petroleum Exporting Countries and allies has also buttressed prices.
• The robust rebound has been underpinned by a demand recovery in the U.S., China and Europe, and there are signs the Covid-19 resurgence in Asia may be easing.
• Brent crude rose by 0.64% to close at $72.68. The WTI rose by 0.69% to close at $70.53, the Bonny light crude rose by 0.23% to close at $70.98, the OPEC basket rose by 0.46% to close at $70.21 while natural gas closed at $3.131, representing a 0.10% increase.

External reserve

Nigeria’s external reserve continued its decline, as it dropped by $67 million on Monday, 7th June 2021 to close at $34.103 billion, representing a 0.2% decline when compared to $34.170 billion recorded on Friday, June 4, 2021.

• Nigeria’s foreign reserve has lost about $1.266 billion year-to-date, having recorded declines consecutively for 32 days.

• The current position also represents the lowest level in over one year. The last time Nigeria’s foreign reserve position was this low was 7th May 2021, when it stood at $31.19 billion.

• The decline persists despite the increase in global crude oil prices.

• The decline can be attributed to a drop in crude oil export arising from the reduction in the purchase of Nigeria’s crude oil by India, a major importer of Nigerian crude and a nation currently burdened by a second wave of the covid-19 pandemic.