Another devaluation around the corner as dollar at NAFEX sells at N422.59

Tuesday 9th February 2021: The exchange rate between the Naira and the US Dollar traded for as high as N422.59 at the Investor and Exporter in the clearest sign yet that another devaluation might be around the corner.  

However, the exchange rate closed at N401/1 representing a 0.63% decline compared to the closing rate of N398.5/$1 recorded on Monday, 8th February 2021.  

At N422/$1, traders believe this is a sign that the central bank is willing to accept further depreciation despite the rising price of crude oil.  

Meanwhile, the exchange rate at the black market remained unchanged at N480/$1. 

Trading at the official NAFEX window  

The exchange rate between the naira and dollar at the Investors and Exporters (I&E) window to close at N401/$1 on Tuesday the lowest in 2021. This represents a decline of N2.5 compared to N398.5/$1 recorded on Monday. 

  • The opening indicative rate was N398.42/$1 to a dollar on Tuesday, 0.23% depreciation compared to N397.5/$1 recorded on Monday, 8th February 2021. 
  • The dollar sold for as high as N422 to a dollar during intra-day trading before it closed at N401 to a dollar. It also sold for as low as N390/$1 during intra-day trading.  
  • Just last week the CBN adjusted its NDF exchange rate due February 23rd  to N412.14 an early signal of where the apex bank thinks the exchange rate could land. 
  • Forex turnover declined by 15.1% at the Investor and Exporters (I&E) window to stand at $49.07 million declining from $57.78 million recorded on Monday, 8th February 2021. 

Cryptocurrency Watch  

  • The price of bitcoin soared to new heights during the day as it reached a record high of $48,216 before retreating to $47,421.53 as of 9:48 pm on Tuesday. 
  • The spike occurred on the back of the world’s richest man, Elon Musk announcing that his company Tesla had purchased Bitcoins worth up to $1.5 billion. 
  • Meanwhile, as Nigerians continued to rage against the central bank’s decision to stop cryptocurrency trading via bank, reports indicate the apex bank is investigating the role of commercial banks in crypto trading.  
  • It was revealed that some of the banks are jittery about the potential ramifications and threading with caution.  
  • Cryptocurrency exchanges have also kickstarted several informal engagements to manage any potential regulatory and law enforcement onslaught that could arise as the central bank remains dogged in its decisions. 

Oil prices hit record high 

Crude oil market extended its run of positive performance as Brent Crude hit a fresh high on Tuesday to close at $61.16 per barrel. 

  • Brent Crude oil gained 0.77% in Tuesday’s trading to stand at $61.16 per barrel.  
  • This gain came on the back of OPEC and its allies pledge to continue to cut down on global crude oil inventories while crude stockpiles in the United States fell to their lowest levels since March last year.  
  • WTI closed at $58.41 (+0.57%), OPEC Basket at $59.58 (+1.12%) while Bonny Light closed at $59.46 (+0.9%). 
  • The rise in crude oil prices could also be attributed to the expectations that the production curbs by OPEC+ would tighten the market in the first quarter of 2021 as well as the enhanced expectation of U.S economic stimulus package. 
  • Meanwhile, Nigeria’s Minister of State, Petroleum Resources, Timipre Sylva said on Tuesday that the federal government has set a target of $10 or less per barrel production cost for Nigeria’s oil industry. 

Nigeria’s external reserve on a steady decline 

  • Nigeria’s external reserve was $35.93 billion as of 8th February 2021, indicating a 0.32% decline when compared to $36.04 billion recorded as of Friday 5th February 2021. 
  • The foreign reserve has persistently recorded a steady decline since the 25th of January 2021, making a total of $593.4 million loss in 11 days.

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