Forex turnover dropped by 22.9%, as the Naira’s exchange rate at the NAFEX window appreciated marginally against the dollar to close at N394.67/$1 during intra-day trading on Wednesday, December 9.
Also, the Naira appreciated against the dollar, closing at N478/$1 at the parallel market on Wednesday, December 9, 2020, as deposit money bank begin the payment of diaspora remittances in dollars as had been directed by the Central Bank of Nigeria.
Nigeria’s external reserve lost $452 million in about a month as it hits $35.211 billion as at December 4, 2020. The continuous drop in the external reserve will limit CBN’s ability to intervene in the foreign exchange market, thereby putting pressure on the naira.
ABCON President, Aminu Gwadebe, had blamed the crash of the naira on illegal activities that include hoarding, speculation, illegal cash evacuations through the nation’s borders, use of the dollar for gratification and so on.
Parallel market: According to information from Abokifx – a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira appreciated against the dollar to close at N478/$1 on Wednesday.
This represents a N5 gain when compared to the N483/$1 that it exchanged for on Tuesday, December 8.
- The local currency had strengthened by about 7.8% within one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers.
- This is to boost the supply of dollars in the foreign exchange market and reduce the high demand for forex by traders
- However, the gains appear to have been completely erased with the recent crash of the exchange rate.
- The CBN has sold over $1 billion to BDCs since they resumed forex sales on Monday, September 7, 2020.
- This was expected to inject more liquidity into the retail end of the foreign exchange market and discourage hoarding and speculation.
- However, the exchange rate against the dollar has remained volatile after the initial gains made, following the CBN’s resumption of sales of dollars to the BDCs.
- Despite the CBN intervention, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.
NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N394.67/$1.
- This represents a 33 kobo gain when compared with the N395/$1 that it exchanged for on Tuesday, December 8.
- The opening indicative rate was N391.49 to a dollar on Wednesday. This represents a N1.01 gain when compared to the N392.50 that was recorded on Tuesday.
- The N408.18 to a dollar was the highest rate during intra-day trading before, it still closed at N394.67 to a dollar. It also sold for as low as N381/$1 during intra-day trading.
- Forex turnover: Forex turnover at the Investor and Exporters (I&E) window declined by 22.9% on Wednesday, December 9, 2020.
According to the data tracked by FMDQ, forex turnover dropped from $92.43 million on Tuesday, December 8, 2020, to $71.24 million on Wednesday, December 9, 2020.
- The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate their funds.
- The continuous drop in dollar supply reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
- The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
- Total forex trading at the NAFEX window in the month of September was about $1.98 billion, compared to $843.97 million in August.
- The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
- Some members of MPC of the CBN had expressed serious concerns over the increasing demand pressure in the country’s foreign exchange market. This is an obligation of manufacturers to their foreign suppliers that continues to increase in the face of dollar shortages.
We have dollars – Nigerian banks tell customers
Deposit money banks in the country have moved to implement the directive from the Central Bank of Nigeria (CBN) to set up teller points within their banking halls to attend to the forex needs of customers.
This is evidenced by several emails sent by the banks to their customers over the weekend.
Recall that in an unexpected move last week, Godwin Emefiele, the CBN governor announced the discontinuation of the sale of forex to Bureaux de Change operators in the country citing a slew of misdemeanours by the latter, which were jeopardizing the apex bank’s FX policy, as the reason behind the ban.
Emefiele had in the same breath, instructed banks to set up teller points within the banking halls to attend to the legitimate forex needs of customers.
An email from First City Monument Bank (FCMB) to customers read in part:
“We are pleased to inform you that the Central bank of Nigeria (CBN) has approved the resumption of sales of Personal or Business Travel Allowance (PTA/BTA).
To access this, simply visit any FCMB branch today with the following documents and make your request.
- Duly completed form A
- Valid international passport and visa
- Return flight ticket
For more information, please contact your Relationship Manager.
Thank you for choosing FCMB.”
A similar email from Zenith bank read:
“Personal/Business Travel Allowance (PTA/BTA) available for sale at Zenith Bank Branches nationwide. Simply walk into any of our branches with your travel documents.”
The email from UBA stated that the bank had implemented dedicated teller points for FX transactions at all their branches nationwide, listing PTA/BTA, foreign school fees payment, receipt of money transfer (FX) in cash and access to other remittance services “with ease” as services available to customers.
From Guarantee Trust Bank and Stanbic IBTC, the notifying email was much lengthier with Stanbic Bank including a subtle caveat.
“…As part pf our commitment to continually serve our customers, we will ensure all customers’ requests are handled on a first served priority basis based on the availability of funds both in cash and electronically…”
Guaranty Trust Bank’s email had even more caveats. While listing the pre-qualifying documents for PTA/BTA, they noted:
“…PTA request is limited to a maximum of $4000 per quarter per applicant.”
In the same breath, the bank also listed, “A return ticket originating from Nigeria with a minimum travel time of 5 hours to your destination,” as one of the qualifying documents for accessing PTA/BTA from the bank.
It is interesting to note that flights to some African countries are completed well under 5 hours and this leaves one wondering about GT Bank customers needing forex to make such trips. On an Air Peace carrier, for instance, a trip from Lagos to Accra is estimated to take 1 hour. Lagos to Banjul (The Gambia) takes 4 hours 45 minutes, Lagos to Dakar (Senegal) takes 3 hours 30 minutes while Lagos to Freetown takes just 3 hours.
These notwithstanding, bankers who spoke to our source (on condition of anonymity) confirmed that the banks are fully prepared to meet individual and business forex needs, stating that the CBN’s move in ending forex sale to BDCs was the right move.
“The banks are more than capable of rendering this service,” Kayode (name changed), a staff of one of the top tier banks told our source .
“The issue has always been that the BDCs had constituted themselves into a powerful cabal with far-reaching influence among Nigeria’s powerbrokers. This is why they were able to take over such a crucial banking function, but the days of their reign are over now. We are only hoping that Emefiele is not removed from office for this bold action,” he added.
When asked if the CBN had funded the banks with sufficient forex to meet customer requests, another bank staff told our analyst:
“All the branches of all the banks have been capacitated to disburse FX to customers. You can walk into any bank branch and change your naira to dollar up to the daily limit set by the bank.
“You can also receive FX directly into your domiciliary account, which unlike before, now takes only a few minutes to set up. What government wants is for monies received from abroad to be documented, which is why the CBN has asked that we route FX inflows through domiciliary accounts.”
When asked about the availability of forex for transactions such as overseas payments, he said:
“The bank will not give you forex to make overseas payments; you present the necessary paperwork to them and they debit your account and credit the organisation where you want to send the money to abroad.
“The CBN does not want individuals to start another round-tripping racket and this is why the regulator has put this rule in place. This is the procedure for making oversea payments like school fees, medical bills, and payment of suppliers for goods (or services) to be imported into the country.”
Our respondent also confirmed that the exchange rate would fall over the coming weeks as the panic and furore over the CBN/BDC debacle subsides and people start to see that the system has been rejigged in their favour. He advised individuals to open domiciliary accounts and save in forex if they can afford to.
In case you missed it
It was reported last week that the CBN governor instructed Deposit Money Banks (DMBs) to set up teller points in designated branches for the sale of foreign exchange to meet legitimate forex requests of their customers.
This came after the apex bank announced that it will discontinue the sale of dollars to the Bureau De Change (BDC) operators.
The directive was contained in a memo by the CBN to the deposit money banks and signed by the Director, Bank Supervision Department of the apex bank, on Thursday, July 28, 2021, in Abuja.
The CBN in the memo also asked the banks to publicize the locations of the designated branches and make necessary arrangements to sell forex to customers in cash and/or electronically.
Naira gains at forex markets as dollar supply rises by 108.5% with drop in demand
Friday, 30th July 2021: The exchange rate between the naira and the US dollar closed lower at N411.44/$1 at the official Investors and Exporters window.
Naira appreciated against the US dollar to close at N411.44/$1 on Friday, representing a 0.06% gain compared to N411.67/$1 recorded on the previous day.
Also, naira appreciated the parallel market to close at N515/$1, having traded at N520/$1 on the previous day. This represents a N5 gain when compared to the previous day’s rate as dollar supply rose significantly by 108.5%
The recovery is coming after exchange rate had had dropped following the announcement of the ban placed on the sale of forex to BDC operators in Nigeria by the CBN Governor, Godwin Emefiele.
The naira strengthened further as dollar demand dropped with the BDC operators assuring of continuous provision of foreign exchange services despite non-allocation of forex by the CBN.
Trading at the official I&E window
Naira appreciated against the US dollar at the Investors and Exporters window on Friday to close at N411.44/$1, representing a 23 kobo gain when compared to N411.67/$1 recorded on Thursday.
- The opening indicative rate also appreciated from N411.58/$1 recorded on Thursday, 29th July 2021 to close at N411.40/$1 on Friday.
- An exchange rate of N412.25 to a dollar was the highest rate recorded during intra-day trading before it settled at N411.44/$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 by 108.5% on Friday, 30th July 2021.
- According to data tracked from FMDQ, forex turnover increased from $58.07 million recorded on Thursday, 29th July 2021 to $121.08 million on Friday.
The world’s most popular and largest cryptocurrency, Bitcoin, dropped by 5.91% in the early hours of Monday to close at $39,753.20 after it had built some momentum and hit the highest level since the middle of May.
- Bitcoin had gained on Sunday for an 11th day in the past 12 and traded up to $42,606, its highest since May 18.
- Bitcoin, which for weeks trended downward from its mid-April record near $65,000, has now spent more than a week building back as supportive comments from Elon Musk and Cathie Wood helped bump it out of a declining trend.
- Edward Moya, senior market analyst for North America at Oanda Corp., Edward Moya, in his note on Friday said that retail interest is strong, while institutional interest is somewhat lagging and needing fresh endorsements.
- Meanwhile, the second biggest cryptocurrency by market capitalization, Ethereum, dropped by 2.66% to trade at $2,551.84.
Crude oil price
The crude oil market was bearish on Sunday evening as Brent crude dropped by 1.14% to close at $74.55 per barrel as oil fell after 4 monthly gains with data signaling a slowdown in China and investors monitored the spread of the delta coronavirus variant.
- While futures dropped, traders also monitored a rise in tensions between Iran and the U.S. Washington has formally blamed Tehran for an attack on an Israel-linked oil tanker, warning of an appropriate response.
- The standoff comes as the two nations are seeking to revive a nuclear accord that, if successful, may pave the way for an end to U.S. sanctions on official Iranian oil flows.
- Oil has risen every month this year apart from March as the global recovery from the pandemic stoked consumption, although traders remain wary about the threat carried by the disease’s persistence.
- Against that backdrop, the Organization of Petroleum Exporting Countries and allies have largely followed through with plans to ease supply curbs, with an extra 400,000 barrels a day to be released this month
- Also, WTI Crude dropped 1.04% on Sunday evening to trade at $73.18 per barrel, Natural gas recorded a 1.18% gain in price to trade at $3.960. Meanwhile, Bonny Light traded in a positive region at $74.32 per barrel, representing a 0.27% gain.
Nigeria’s foreign reserve increased by $26 million on Thursday, 29th July 2021 to close at $33.381 billion compared to $33.355 billion recorded as of 28th July 2021.
- Since the reserve started moving positively it has gained over $287.1 million in just 10 days despite enduring a significant plunge in the previous months.
- Recall that the Central Bank of Nigeria banned the sales 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.
Naira gains at official market as CBN moves to launch digital currency in October
Thursday 22nd July 2021: The exchange rate between the naira and the US dollar closed at N411.63/$1 at the official forex market.
Naira appreciated against the US dollar on Thursday, 22nd July 2021 to close at N411.63/$1. This represents a 4 kobo gain when compared to N411.67/$1 that was recorded on Monday, 19th July 2021.
At the parallel market, however, the naira remained stable against the US dollar at an exchange rate of N503/$1, the same rate that was recorded on Monday 19th July 2021.
However, the dollar supply at the official forex market dropped by 18.1% on Thursday to stand at $137.83 million as external reserve continues its rebound.
Also, an earlier report from Themoneymetrics suggests that the apex bank has concluded plans to launch the pilot scheme of its digital currency by October 1, 2021.
Trading at the official NAFEX window
Naira appreciated against the US dollar at the Investors and Exporters window on Thursday to close at N411.63/$1 as against the N411.67/$1 recorded on Monday, 19th July 2021.
The opening indicative rate stood at N411.57/$1 on Thursday, representing a 47 kobo drop when compared to N411.10/$1 recorded in the previous trading session.
An exchange rate of N412.78/$1 was the highest rate recorded during intra-day trading before it settled at N411.63/$1, while it sold for as low as N403.22/$1 during intra-day trading.
Meanwhile, forex turnover at the Investors and Exporters (I&E) window dropped by 18.1% on Thursday, 22nd July 2021.
According to data tracked from FMDQ, forex turnover declined from $168.19 million recorded on Monday, 19th July 2021 to $137.83 million on Thursday, 22nd July 2021.
The world’s most popular and largest cryptocurrency, Bitcoin, continued its rebound for the second consecutive day to close at $32,267.63 as of Thursday evening, rising by 0.70%.
Bitcoin steadied as traders mulled the largest cryptocurrency’s next move following a rebound stoked by comments from Elon Musk, Jack Dorsey and Cathie Wood.
Other cryptocurrencies such as Ethereum and Dogecoin, held onto gains, as did the Bloomberg Galaxy Crypto Index.
Some $1.3 trillion has been wiped off the market value of cryptocurrencies since mid-May.
Bitcoin has faced a range of obstacles, including stepped-up regulatory scrutiny in China, Europe and the U.S. and concerns about the energy needed by the computers underpinning it. Investors have also generally become more cautious about speculative assets.
Meanwhile, the second-largest cryptocurrency by market capitalization, Ethereum, was up by 2.16%, to close at $2,024.34.
Crude oil prices held its biggest gain in 3 months amid expectations that recovering demand will soon tighten global markets as Brent crude rose by 2.16% to close at $73.79 per barrel on Thursday evening.
Oil rose to the highest in a week amid expectations that recovering demand from the U.S. to India and Europe will further tighten global crude markets.
Oil has rebounded after an almost 8% loss on Monday as fears around the delta variant and its impact on economic recovery shook broader markets.
The price plunge came just after a weekend meeting of OPEC+, at which the 23-nation alliance led by Saudi Arabia and Russia finalized plans to restore halted production.
Since then, the market has been recovering as traders anticipate that OPEC+’s scheduled output increases aren’t large enough to avert a shortfall in the coming months.
Meanwhile, according to reports, the world’s top oil importer, China, has started to release over 20 million barrels of crude oil from its strategic reserve in a move seen as seeking to curb the recent oil price rally.
Brent Crude rose by 2.16% to close at $73.79 per barrel, WTI dropped by 0.24% to close at $71.74 after initially climbing 2.3% earlier on Thursday. Natural Gas dropped by 0.20% to close at $3.995, while OPEC basket dropped by 4.44% to close at $69.93 per barrel.
However, the Bonny Light rose by 3.70% to close at $70.87 per barrel.
Nigeria’s foreign reserve continued its rebound as it rose by $53 million on Monday, 19th July 2021, to close at $33.171 billion as against the N33.118 billion that was recorded on Friday, 16th July 2021.
Nigeria’s reserve had recorded a significant reduction in recent times, losing about $219.42 million month-to-date and about $2.27 billion from January to date.
The change in tide to a positive is an indication of increased forex earnings, which would come as a relief for Nigeria, as an increase in external reserve will help Nigeria meet up with pent-up financial obligations.
The increase will also serve as a relief for Nigeria’s exchange rate, which had been on a downturn lately, crossing the N500/$1 mark at the parallel market.
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