Naira appreciates at forex market as dollar supply increases significantly by 141%

Monday, 12th July 2021: The exchange rate between the naira and the US dollar started the week on a positive note as it closed at N411.5/$1 at the official forex market.

Naira appreciated against the US dollar on Monday, closing at N411.5 to a dollar, representing a 0.06% gain compared to N411.75/$1 recorded on Friday, 9th July 2021.

However, the naira maintained stability at the parallel market to close at N505/$1, the same as recorded on Friday, 9th July 2020. Nigeria’s external reserve returned to declining ways after only two days of consecutive appreciation. It lost over $21 million on Friday, 9th July 2021.

Trading at the official NAFEX window

Naira appreciated against the US dollar at the Investors and Exporters window on Monday to close at N411.5/$1 from N411.75/$1 recorded at the end of trade on Friday, 9th July 2021.

• The opening indicative rate also appreciated marginally from N411.29/$1 recorded on Friday to close at N411.25/$1 on Monday.
• An exchange rate of N412.9 to a dollar was the highest rate recorded during intra-day trading before it settled at N411.5/$1, while it sold for as low as N400/$1 during intra-day trading.
• Meanwhile, forex turnover at the Investors and Exporters (I&E) window increased significantly by 140.7% on Monday, 12th July 2021.
• According to data tracked by Nairametrics from FMDQ, forex turnover surged from $73.99 million recorded on Friday, 9th July 2021 to $178.13 million on Monday, 12th July 2021.

Cryptocurrency watch

The crypto market started the day on Tuesday on a negative note, recording a decline of 0.13% indicating a loss of $1.42 billion in capitalisation.

• However, the world’s most popular digital asset, Bitcoin, as of 5:15 am on Tuesday was trading at $33,120,64 indicating a 0.05% gain, while Ethereum dipped about 0.43% to trade at $2,026.15.
• In the previous week, Bitcoin investors panicked as U.S Senator Elizabeth Warren, who chairs the Senate Banking Committee’s Subcommittee on Economic Policy, gave the U.S Security and Exchange Commission (SEC) an ultimatum for cryptocurrency regulation. She gave Gary Gensler, the SEC Chairman, till July 28th to respond to questions surrounding cryptocurrency regulations.
• Consequently, this caused the asset class to decline below $33,000 during the week but over the weekend, the market rebounded on positive news of new Whale accumulation.
• Meanwhile, despite the ban on crypto activities in Nigeria, peer-to-peer bitcoin trade volumes went up in June 2021. According to data sourced from P2P exchanges, the volume of P2P trades in the country went up to just a little under $38 million.

Oil price

Brent Crude made a rebound in the early hours of Tuesday with a 0.24% gain to trade at $75.34, while WTI Crude recorded a 0.27% gain to trade at $74.3 per barrel as of 5:30 am on Tuesday.

• Oil prices dipped about 1% on Monday over concerns of spreading covid-19 variants affecting the global economic recovery, which has reduced fuel demand back to pre-pandemic levels.
• Also, Tokyo’s reimposed new lockdowns due to concerns over covid-infections before hosting the Summer Olympics. This has dampened the bullish trend recorded lately in the global crude oil market.
• However, analysts have predicted that the spread and levels of inventory suggest that oil prices can still go higher.

External reserve

Nigeria’s external reserve plunged $21.03 million on Friday, 9th July 2021 to close at $33.09 billion. This came on the back of back-to-back gains recorded in just two days.

• The forex reserve position continues to deplete despite crude oil price rally at the global crude oil market.
• So far in the month of July 2021, Nigeria’s reserve has lost a total of $223.77 million while its year-to-date loss stands at $2.27 billion.
• It had appeared that the initial rise in the price of crude oil had begun to reflect in Nigeria’s reserve, however, it has reverted to its negative trend.
• Nigeria needs to boost its foreign reserves in order to meet up with pent-up obligations.