Naira falls to N410/$1 at NAFEX window, following increased dollar scarcity

Friday, 19th March 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.

The Naira depreciated marginally against the US Dollar on Friday, 19th March 2021, to close at N410/$1. This represents a 0.08% decline when compared with the N409.67/$1 recorded in the previous day.

Also, the Naira maintained stability against the US Dollar in the parallel market, to close at N485 to a dollar. the same as recorded on the previous day, as the country’s external reserves dipped further to stand at $34.42 billion as of 18th March 2021.

Forex turnover also dropped by 52.7% from $98.2 million recorded on Thursday to $46.43 million on Friday.

Trading at the official NAFEX window

Naira depreciated against the US Dollar at the Investors and Exporters window on Friday to close at N410 to a dollar. This represents a 33 kobo drop when compared to N409.67/$1 recorded on Thursday, 18th March 2021.

  • The opening indicative rate closed at N410.05 to a dollar on Friday. This represents a N0.91 depreciation when compared to N409.14/$1 recorded on Thursday.
  • Also, an exchange rate of N412 to a dollar was the highest rate recorded during intra-day trading before it closed at N410/$1. It also sold for as low as N394/$1 during intra-day trading.
  • Forex turnover at the Investor and Exporters (I&E) window dropped by 52.7% on Friday, 19th March 2021.
  • FMDQ suggested that forex turnover declined from $98.2 million recorded on Thursday, March 18, 2021, to $46.43 million on Friday, March 19, 2021

Cryptocurrency watch

Bitcoin, the world’s most popular and largest cryptocurrency dipped by 0.87% in the early hours of Monday to sell for $56,880.

  • This came on the back of a report, released by Deutsche Bank, which noted that Bitcoin is too important to ignore and is now the third-largest currency in terms of the total value in circulation.
  • The report also stated that various governments and central banks know that cryptocurrencies are here to stay and are expected to start regulating the industry this year.
  • Meanwhile, Nigeria’s Central Bank had instructed all Deposit Money Banks, Non-Financial Institutions, and Other Financial institutions to immediately close the accounts of persons transacting in or operating cryptocurrency within their systems.
  • This move caused peer-2-peer transactions of Bitcoin in Nigeria to surge by 15% within the period.

Oil prices continue to decline

Crude oil prices recorded their biggest declines witnessed in recent times as Brent Crude dipped by as much as 6.8% in the week ended 19th March 2021.

  • The decline in the price of crude oil could be attributed to the new wave of concern regarding oil demand, lockdowns in Europe, vaccine safety concerns, and growing oil stocks in the United States.
  • This is despite the upward trend recorded in recent weeks when oil prices hit the $70 per barrel mark after the OPEC+ decided to sustain the production cut for an additional month.
  • Meanwhile, on Sunday, 21st March 2021, Brent Crude closed at $64.08 (-0.7%). WTI (-0.72%), Bonny Light (-2%), and Natural Gas (-1.3%)

External reserves

Nigeria’s external reserve declined by 0.07% on Thursday, 18th March 2021 to stand at $34.42 billion being a record low in over 10 months.

  • The country’s external reserve declined from $34.44 billion recorded as of Thursday, 18th March 2021 to stand at $34.42 billion as of 19th March 2021.
  • The last time Nigeria’s external reserve position, dropped to this low, was on the 8th of May 2020, when the reserve stood at $34.29 billion
  • Meanwhile, the latest decline indicates that Nigeria’s current external reserve position has lost about $683.2 million in the month of March 2021.
  • It is worth noting that the recent bearish run at the global crude oil market could further dip the country’s external reserves as Brent Crude oil is currently selling at $60.96 per barrel.

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