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Naira rallies at black market as speculators continue dollar dump

The Naira appreciated against the dollar to close at N440/$1 on Tuesday.

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Nigeria’s exchange rate at the NAFEX window depreciated to close at N386 during intraday trading on Tuesday, September 1, 2020. In sharp contrast, the exchange rate at the parallel market recorded another record gain on Tuesday as it closed at N440/$1.

Market Watch

Parallel Market: At the black market where forex is traded unofficially, the Naira appreciated against the dollar to close at N440/$1 on Tuesday, according to information from Abokifx, a prominent FX tracking website. This represents a N25 gain when compared to the N465/$1 that it exchanged on Monday, August 31.

Themoneymetrics checks reveal despite offering a bid price some traders fail to turn up to to buy leaving sellers stranded.

NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N386/$1.

  • This represents a 33 kobo drop when compared to the N385.67 that it exchanged on Monday, August 31, 2020.
  • The opening indicative rate was N386.03 to a dollar on Tuesday. This represents a 47 kobo gain when compared to the N386.50 to a dollar that was recorded on Monday.
  • The N395.13 to a dollar is the highest rate during intraday trading before closing at N386. It also sold for as low as N380/$1 during intraday trading.

Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window rose significantly by 307% on Tuesday, September 1, 2020, as it continued with the gain that was recorded the previous trading day.

  • According to the data tracked by  Themoneymetrics from FMDQ, forex turnover rose from $14.37 million on Monday, August 31, 2020, to $58.46 million on Tuesday, September 1, 2020.
  • This represents a second consecutive trading day of increase in turnover following improved dollar liquidity.
  • Despite improved liquidity, the volatility of the foreign exchange market still persists. 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 $23.19 million which represents a significant drop from the $71.13 million that was recorded the previous week. The day’s FX turnover is still a far cry from the $200 million mark that was recorded sometime 2 weeks ago.
  • Total forex trading at the NAFEX window in the month of August was about $857 million compared to $937 million in July.
  • The exchange rate disparity between the official NAFEX rate and the black-market rate has continued to reduce significantly these past few days dropping to N54.

The central bank moved towards exchange rate unification three weeks ago after it devalued the official rate to N380/$1.

The local currency has been strengthenedespecially in the black market as the Central Bank of Nigeria introduces some measures targeted at exporters and importers in order to try to boost the supply of dollars in the foreign exchange market and reduce the high demand for forex by traders.

The resumption of sales of forex to BDCs will inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.

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CURRENCIES

Exchange rate stabilises at N410/$1 as oil price rallies above $65 per barrel

The exchange rate between the Naira and the US Dollar closed at N410/$1 at the Investors and Exporters window on Monday as oil prices hit $65.24 per barrel

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Monday 22nd February 2021: The exchange rate between the Naira and the US Dollar closed at N410/$1 at the Investors and Exporters window, where forex is traded officially.

Naira remained stable on the NAFEX window to stand at N470 to a dollar on Monday, which is the same rate it closed on the previous trading day.

Also, Naira depreciated on the parallel market to close at N480/$1 on Monday, 22nd February 2021. This represents a N2 drop when compared to N478/$1 recorded on Friday, 19th February 2021.

Brent Crude oil price hit a record high as it closed at $65.24 per barrel as Goldman Sach’s projection indicates bullish trades in Q2 2020.

Trading at the official NAFEX window

The exchange rate between the Naira and Dollar at the Investors and Exporters (I&E) window maintained the same rate as recorded on Friday last week to close at N410/$1 on Monday, 22nd February 2021.

  • The opening indicative rate closed at N408.04 to a dollar on Monday. This represents a 43 kobo drop when compared to N407.61 to a dollar that was recorded the previous trading day on Friday, February 19, 2021.
  • An exchange rate of N412 to a dollar was the highest rate during intra-day trading before it closed at N410/$1. It also sold for as low as N389.75/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window declined by 20.8% on Monday, February 22, 2021.
  • According to the data tracked by Themoneymetrics from FMDQ, forex turnover decreased from $66.41 million recorded on Friday, February 19, 2021, to $52.58 million on Monday, February 22, 2021.

Cryptocurrency Watch

  • The largest cryptocurrency in the world, Bitcoin dipped by 4.76% on Monday to stand $54,753.48 as of 11:10pm.
  • This came after the world’s richest man, Elon Musk disclosed that the price of bitcoin and Ethereum seems to be high.
  • Meanwhile, three days ago, the world’s most demanded crypto-asset breached the $1 trillion market capitalisation to become the sixth most-valuable asset worldwide.
  • It is worth noting that, following the directive of the CBN prohibiting regulated financial institutions from dealing with Cryptos, Nigerians have moved towards peer-to-peer transactions trading directly without a third party.
  • According to a recent study seen by Themoneymetrics , the use of Bitcoin for peer-to-peer lending in Nigeria surged by 16% since the CBN directive took effect about 18 days ago

Crude oil prices top $64 per barrel

Crude oil prices picked up again on Monday as Brent Crude gained an additional $2.33 to close at $65.24 per barrel.

  • The increase represents a 3.7% increase when compared to $62.91 per barrel recorded on the previous trading day.
  • The price increase came shortly after Goldman Sach forecasted that oil prices would climb around $70 per barrel in the second quarter of the year.
  • It could also be attributed to the realization that U.S oil production and refineries will take a bit of time to resume their normal level of output after the Texas Freeze knocked out oil refineries.
  • The oil market rallied despite the news that Saudi Arabia and Russia might be on the verge of a disagreement again over output agreement, which the group will deliberate on in March.
  • Meanwhile, Brent closed at $65.24 (+3.7%), WTI closed at $61.49 (+3.8%), Bonny Light at $62.09 (-1.16%), and Natural Gas closed at $2.946 (-0.24%).

Declining external reserve despite bullish oil prices

Nigeria’s external reserve dipped further on Thursday, 18th February 2021, to stand at $35.47 billion.

  • This represents a decline of 0.15% compared to $35.53 billion recorded as of Wednesday, 17th February 2021.
  • Despite rallying oil prices, Nigeria’s external reserve has recorded a steady decline since the 25th of January 2021, losing a sum of $958.1 million in less than a month.
  • It is worth noting that despite the significant increase recorded earlier in January, the current reserve positive is only $99.9 million more than $35.37 billion recorded as of 31st December 2020.
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CURRENCIES

Exchange rate weakens at NAFEX window as Naira settles at N410/$1

Naira closed against the US Dollar at N410/$1 on Friday, 19th February 2021, indicating a drop of 0.54%

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Friday 19th February 2021: The exchange rate between the Naira and the US Dollar closed at N410/$1 at the NAFEX window, where forex is traded officially. Naira  

Naira closed against the US Dollar at N410/$1, representing a 0.54% drop compared to N407.8/$1 recorded on Thursday 18th February 2021. This is the second time in the week that the exchange rate has closed at N410/$1 and the ninth consecutive trading day it closed over N400/$1.

Also, Naira depreciated at the parallel market to close at N478/$1 on Friday, 19th February 2021This represents a N1 shortfall compared to N477/$1 recorded on the previous day.

Trading at the official NAFEX window

The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N410/$1 for the second time in the week. This represents a N2.2 drop when compared with the N407.8/$1 that it closed on the previous trading day. 

  • The opening indicative rate closed at N407.61 to a dollar on Friday. This represents a 48 kobo drop when compared to N407.13 to a dollar that was recorded the previous trading day on Thursday, February 18, 2021. 
  • An exchange rate of N424.15 to a dollar was the highest rate during intra-day trading before it closed at N410/$1. It also sold for as low as N390/$1 during intra-day trading. 
  • It is also worth noting that throughout the week, the lowest rate during any inter-day trading was N390/$1. 
  • However, forex turnover at the Investor and Exporters (I&E) window rose by 5.9% on Friday, February 19, 2021. 
  • According to the data tracked by Themoneymetrics from FMDQ, forex turnover increased from $62.69 million on Thursday, February 18, 2021, to $66.41 million on Friday, February 19, 2021. 

Cryptocurrency Watch

Bitcoin, the largest cryptocurrency in the world reached an all-time high on Sunday, 21st 2021 to stand at $58,022.48 as of 9:37 pm. 

  • This is just two days after the world’s most demanded crypto-asset breached the $1 trillion market capitalisation to become the sixth most-valuable asset worldwide. 
  • So far in the year, Bitcoin has gained 97.2% from $29,424.17 recorded as of 31st of December 2020. 
  • Meanwhile, the richest man in the world, Elon Musk disclosed through his twitter handle that the price of the two leading cryptos seems to be in overbought territory. 
  • However, popular American online financial advisory company, Motley Fool disclosed that it will be investing $5 million in Bitcoins in the coming weeks using the firm’s fund. 

Oil price dips as Saudi Arabia moves to reverse oil production cut

Crude oil price (Brent crude) dipped on Friday, 19th February 2021 to close at $62.91. 

  • Brent Crude oil price declined by 1.6% to close at $62.91 on Friday. 
  • The decline in oil prices came on the back of Saudi Arabia’s move to increase oil output. According to reports during the week Saudi Arabia is poised to reverse its 1mbpd voluntary production cut in the coming weeks. 
  • Also, about 4mb/d of US oil production was sidelined due to power outages and other equipment failures during the week, which include the damage of four of Texas’ largest oil refineries. A development that is expected to reduce crude oil demand. 
  • Meanwhile, WTI closed at $59.24 (-2.12%), OPEC Basket gained 1.52% to close at $63.43, Bonny Light closed at $62.09 (-1.16%) while Natural gas dipped by 0.42% to settle at $3.069. 

Dwindling external reserve

  • Nigeria’s external reserve dipped further by Thursday, 18th February 2021, to stand at $35.47 billion. 
  • This represents a decline of 0.15% compared to $35.53 billion recorded as Wednesday, 17th February 2021. 
  • Despite rallying oil prices, Nigeria’s external reserve has recorded a steady decline since 25th of January 2021, losing a sum of $958.1 million in less than a month. 
  • It is worth noting that despite the significant increase recorded earlier in January, the current reserve positive is only $99.9 million more than $35.37 billion recorded as of 31st December 2020. 
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CURRENCIES

Naira gains at NAFEX window as CBN’s intervention in forex market continues

The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N393.83/$1.

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On January 5, 2020, the exchange rate between the naira and dollar closed at N393.83/$1, the second trading day of 2021 at the Investors and Exporters’ (NAFEX) window where forex is traded officially.

This is an appreciation from the N394.30 recorded on the previous trading day, January 4, 2021.

Themoneymetrics understands that intervention by the Central Bank of Nigeria has forced prices further down on Tuesday, sustaining the appreciation recorded on the last day of trading after the sharp depreciation recorded on the last trading day of 2020.

We also reported last week that the latest round of adjustment at the I&E window is temporary as the rates could fall back below N400/$1.

However, at the black market where forex traded unofficially, the exchange rate continued to remain stable at N470/$1 on Tuesday, January 5, 2021. The exchange rate at the parallel market closed at N470/$1 on the previous trading day January 4, 2021.  It has been trading at N470/$1 since the 29th of December 2020.

The exchange rate disparity between the parallel market and the official market widened again to N76.17 representing a 16% devaluation differential.

NAFEX

The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N393.83/$1 as against N394.30 reported on January 4, 2021.

  • This represents a 47 kobo gain when compared with that of the previous trading day.
  • The opening indicative rate was N394.63 to a dollar on Monday. This represents a N15.3 gain when compared to the N409.93 that was recorded on Monday, January 4, 2021.
  • The N411 to a dollar was the highest rate during intra-day trading before, it still closed at N393.83 to a dollar. It also sold for as low as N387.10/$1 during intra-day trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window rose by 47.3% on Tuesday, January 5, 2021.

  • According to the data tracked by Themoneymetrics from FMDQ, forex turnover rose from $22.75 million on Monday, January 4, 2021, to $33.51 million on Tuesday, January 5, 2021.
  • 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.
  • 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.

Can the naira sustain below N400?

Last Thursday, December 31, 2020, the central bank allowed the exchange rate to depreciate to N410.25 as a late demand surge forced prices higher. Even though the highest price for the day was N411, the market still closed lower at N393.83 as the trend from the previous trading day continued, blowing any initial belief that a devaluation had occurred last week.

Devaluation supporters who had expected this to be a nudge towards “market reality” will be surprised by the appreciation recorded on Monday, suggesting that the central bank will continue with the defence of the local currency in the new year. On the flip side, policy supporters will cite this as the effect of market forces.

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