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U.S dollar tumble, Currency traders more risk averse

U.S dollar index used to gauge the greenback’s strength against 6 major currencies lost about 0.2% to settle at 92.710.



The U.S dollar dropped significantly at its last trading session.

The plunge in the greenback’s value is coming on currency traders enthusiasm about a possible COVID-19 vaccine coupled with a strong outflow of funds to riskier assets like stocks.

What we know: At the time of filing this report, the U.S dollar index used to gauge the greenback’s strength against 6 major currencies lost about 0.2% to settle at 92.710 points.

The macro weighing heavily on the U.S dollar bulls is reports on Pfizer’s experimental vaccine was more than 90% effective, leading currency market traders to be more risk-averse at the last trading session of the week after Federal Reserve and the European Central stressed that the economic outlook remains blurry.

The U.S dollar pulled also dropped against most of its major rivals amid worries about the second wave of COVID-19 caseloads in the emerged markets.

What you must know: The U.S. Dollar Index tracks the greenback against a basket of major global currencies such as the Japanese yen, British pound sterling, Swedish Krona, Euro, etc.

Individuals hoping to meet foreign exchange payment obligations via dollar transactions to countries like Europe, and Japan, would need to pay more dollars in fulfilling such payment obligations.

Giving key insights prevailing at the currency market Stephen Innes, Chief Global Market Strategist at Axi in a note to our source gave market reports on other notable pairs.

“Interest rate differentials – so often a principal driver for FX through both the signaling and carry structures – already show less vigor for currencies. Suggesting the most apparent nominee that will drive FX performance in this ‘new normal regime’ is the comparative growth.
The bullish dials are pointing to AUD, NZD, NOK, and SEK as the first pass candidates, and the laggards are likely to be the GBP, EUR, and JPY. With the dollar smack dab in the middle of all divergencies, I think it’s pretty clear idiosyncratic drivers will be the key in 2021 currency outlooks.”

What to expect: Market analysts expect currency traders to intensify their risk going moves into the coming week, meaning the U.S dollar might continue to be under pressure in the near term.

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Nigeria’s external reserve loses $24 million in first week of 2022



Nigeria’s external reserve dipped $24.3 million in the first week of the year to close at $40.49 billion as of 7th January 2021. This represents a 0.06% decline when compared to $40.42 billion recorded as of the start of the week.

This is according to data from the Central Bank of Nigeria (CBN) on the daily reserve movement.

The nation’s foreign reserve had gained $5.99 billion in October, following a $2.76 million gain recorded in September 2021 as a result of the $4 billion Eurobond secured by the federal government and the $3.35 billion IMF Special Drawing Rights facility.

However, the reserve started a downward movement in November after it has crossed the $41 billion mark. Nigeria’s external reserve lost $611.01 million in November, which was followed with a $666.17 million decline in December.

Meanwhile, the annual gain for 2021 was $5.15 billion.

The continuous decline in the nation’s external reserve is attributable to the intervention by the apex bank in ensuring forex stability in the country. Data from the Central Bank shows that a total of $8.97 billion was supplied by the bank to the I&E window, SME, and Invisibles.

The Investors and Exporters window (I&E) is the official market for the sale of foreign exchange in the country after the Central Bank halted the sale of forex to BDC operators mid-2021. However, a sum of $2.77 billion had been sold to the BDC operators between January and June 2021.

Given the managed floating foreign exchange system adopted by the apex bank, the CBN occasionally intervenes in the forex market to ensure they manage the volatility that could be witnessed in the market by releasing funds from the reserve.

A cursory look at the data from the research on the I&E Window, at least a sum of $337.7 million was traded on the exchange, while the official exchange rate appreciated by 4.3% to close at N416.25/$1 in the review week compared to N435/$1 recorded as of the end of the previous week.

What you should know about external reserves

Foreign reserves are assets held on reserve by the central bank of a country used to back liabilities and influence monetary policy. They include foreign banknotes, deposits, bonds, treasury bills and other foreign government securities.

These assets serve many purposes but are most significantly held to ensure that a government or its agency has backup funds if their national currency rapidly devalues. Foreign exchange reserves are also called international or external reserves.

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FOREX inflow into Nigeria surges by 64% to $30 billion in Q3 2021



The amount of foreign exchange that came into Nigeria in Q3 2021, skyrocketed by 64% to $30.18 billion compared to $18.4 billion recorded in the previous quarter. A surge which is attributed to newly acquired federal government loans, recorded in the review period

This is according to data from the Central Bank of Nigeria (CBN) statistical bulletin for Q3 2021.

Dollar inflow of $30.18 billion in the third quarter of 2021, represents the highest quarterly inflow recorded by Nigeria since Q1 2020, before the effect of the covid-19 pandemic. Similarly, on a year-on-year basis, the inflow increased by 14% compared to $26.47 billion recorded in the corresponding period of 2020.

During the period under review, the Nigerian government secured two external loans, which summed up to $7.34 billion, representing $3.34 billion IMF Special Drawing Rights (SDRs) in August and $4 billion Eurobond in September 2021.


  • Inflows through the Central Bank of Nigeria stood at $16.83 billion, which accounts for 55.8% of the total FX inflow in the review period.
  • Also, the $16.83 billion inflow through the CBN in Q3 2021 is 158% and 141% higher than $6.51 billion and $6.98 billion recorded in Q2 2021 and Q3 2020 respectively.
  • Inflows from autonomous sources at $13.35 billion, accounted for 44.2% of the total inflows. In contrast to the previous quarter, it increased by 12% compared to $11.89 billion recorded in Q2 2021.
  • On the other hand, inflows through autonomous sources, declined by 32% compared to $19.49 billion recorded in the corresponding period of the previous year.
  • Autonomous sources of FX includes foreign exchange received from the exportation of non-oil items, capital inflows and invisibles. A further breakdown shows that indivisibles, also includes capital importations, remittances, and other OTC purchases.

Moreso, the increase in the forex inflows from the CBN can be attributed to the significant increase recorded in flows through the Treasury Single Account (TSA) and Third Part Funds in September 2021.

Specifically, funds through the TSA and Third Party Funds grew by over 600% to $2.47 billion in September of the review year, while a sum of $3.2 billion was recorded in Q3 2021, accounting for 11% of the total inflows recorded in the quarter under review.

The Central Bank of Nigeria has continued to intervene in the official forex market, following the ban on the sale of FX to BDC operators in the country. In the same vein, a total of $32 billion exchanged hands in the official Window, while the CBN supplied a sum of $13.16 million to the market between January and September 2021.

The increase in the amount of forex inflow in the county is good for the Nigerian economy as it will help boost liquidity in the system. In this case, the Central Bank has used the newly acquired loans to boost the country’s external reserve, whilst intervening in the market in order to stabilise the local currency.

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BDC ban working as Forex demand migrates to Deposit money banks – CBN



Deposit money banks have witnessed an increase in foreign exchange demand due to the central bank’s ban of forex sale to Bureaux De Change (BDCs).

This was disclosed by CBN deputy governor, Adamu Edward Lametek in his statement at the last Monetary Policy Metting meeting.

He stated that the naira exchange rate has remained stable since the last adjustment at the I&E window, despite tight liquidity management and a recent change in the foreign exchange (FX) management approach.

Adamu stated that there has been a halt to the rapid depreciation seen in the black market. He said, “The initial panic-driven depreciation at the parallel market has gradually given way to real market forces.”

He also stated that the CBN ban has successfully shifted the FX demand to the DMB’s.

Apparently, the revised FX management strategy, which excludes BDCs from direct sales, is working as a substantial share of FX demand has migrated to the DMB’s window. We should expect this pattern to continue in the coming months as confidence in the modified framework grows,” he said.

He added “Overall, I figured out that the primary purpose of the policy at this point would be to preserve and possibly deepen the relative stability the economy has started to record. The current monetary policy configuration continues to be relevant in my view.”

He also stated that despite the positive outcomes so far on inflation and growth, the economy is yet to attain the pre-pandemic level on several fronts. Employment, for instance, continues to be a major policy concern.

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