Naira weakens across forex markets despite significant rise in dollar supply by 81%

Friday, 6th August 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 to close at N411.50/$1 on Friday, representing a 0.06% drop when compared to N411.25/$1 recorded on the previous day.

Also, naira depreciated at the parallel market to close at N510/$1 on Friday, August 6, 2021, having traded at N508/$1 the previous day. This represents a N2 drop when compared to the previous day’s rate.

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The local currency weakened across the forex markets due to demand pressure despite a significant rise in dollar supply by 81.2%.

READ: Exchange rate: Is Nigeria better with a weak naira?

Trading at the official I&E window

Naira depreciated against the US dollar at the Investors and Exporters window on Friday to close at N411.50/$1, this represents a 25 kobo drop when compared to N411.25/$1 recorded on Thursday.

The opening indicative rate closed at N411.35/$1 on Friday, 6th August 2021, this represents a 5 kobo gain when compared to the N411.40/$1 that it closed at on Thursday, 5th August 2021.

READ: Fear rises over possible conversion of Dollars in domiciliary accounts into Naira

An exchange rate of N412.50 to a dollar was the highest rate recorded during intra-day trading before it settled at N411.50/$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 rose significantly by 81.2% on Friday, 6th August 2021.

According to data tracked by Nairametrics from the FMDQ, forex turnover increased from $103.90 million recorded on Thursday, 5th August 2021 to $188.26 million on Friday, August 6, 2021.

READ: Why there is little reason to save in naira

Cryptocurrency watch

The world’s most popular and largest cryptocurrency, Bitcoin, climbed to the highest in over 2 months as it traded at $43,572.69 on Sunday evening although it dropped by 1.76% after it rose earlier in the day.

Bitcoin and Ether reached their highest levels since May after a major Ethereum upgrade and even in the face of uncertainty over crypto rules in the U.S. infrastructure plan.

Bitcoin had earlier on Sunday gained as much as 3.1% to $45,328, its highest level since May 18. Also, Ether had earlier increased by as much as 3.5% to $3,191, gaining for a fifth day amid the Ethereum network’s London upgrade.

Cryptocurrencies are showing signs of life again after pulling back significantly from record highs in recent months, a setback blamed on concerns about China’s crackdown and Elon Musk-fueled questions about Bitcoin’s energy usage.

Ethereum, dropped by 6.75% later on Sunday evening to trade at $2,965.81 at the time of writing this report.

READ: Three things that could make the naira great again

Crude oil price

Oil prices fell on Sunday evening with the Brent crude falling below the $70 mark, capping the biggest weekly loss since October, as the spread of the delta coronavirus variant in China and elsewhere in the world is casting doubts on-demand growth.

Brent crude dropped by 1.99% to close at $69.29 per barrel as the market reacts to concerns that the delta variant, particularly in Asia, may erode mobility significantly.

The WTI dropped 7.7% for the week as the dollar rose following a better-than-expected US jobs report, weakening the appeal of commodities priced in the currency.

After crude soared in the first half of the year on surging demand, the latest chapter in the pandemic has capped prices of not just oil but some other commodities as well.

WTI Crude dropped by 2.02% to trade at $66.90 per barrel on Sunday, Natural gas recorded a 0.70% gain in price to trade at $4,169. Bonny Light was down by 0.71% to trade at $69.77 per barrel.

External reserve

Nigeria’s foreign reserve increased by $26 million on Thursday, 5th August 2021 to close at $33.566 billion compared to $33.540 billion recorded as of 4th August 2021.

Since the reserve started moving positively, it has gained over $472.1 million in 23 days despite enduring a significant plunge in the previous months.

Recall that the Central Bank of Nigeria banned the sale of foreign exchange to Bureau De Change (BDC) operators in the country, due to reports of the operators’ illegal trading of the dollar, trading beyond the limit threshold of $5,000 and gradually dollarizing the Nigerian economy, according to the CBN governor.