Naira gains at forex market despite significant fall in dollar supply

Thursday, 1st July 2021: The exchange rate between the naira the US dollar closed at N410.7/$1 at the Investors and Exporters window, where forex is traded officially.

Naira appreciated against the US dollar on Thursday, having gained 80 kobo to close at N410.7/$1 compared to N411.5/$1 recorded on Wednesday, 30th June 2021. The exchange rate gained despite the significant decline in dollar supply at the forex market.

Meanwhile, the naira was stable at the parallel market, as it closed at N503 to a dollar, the same as recorded in the previous trading session. Also, Nigeria’s external reserve continues to plunge, as it heads to its lowest position in four years and a year-to-date decline of over $2 billion.

Trading at the official NAFEX window

Naira appreciated against the US dollar at the Investors and Exporters window at Thursday’s trading session to close at N410.7/$1 from N411.5/$1 recorded at the end of trade on Wednesday, 30th June 2021.

  • The opening indicative rate remained constant to close at N411.21 to a dollar on Thursday, 1st July 2021 the same as recorded on the previous day.
  • An exchange rate of N420.95 to a dollar was the highest rate recorded during intra-day trading before it settled at N410.7/$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 slumped by 61.9% on Thursday, 1st July 2021.
  • Forex turnover decreased from $160.12 million recorded on Wednesday, 30th June 2021 to $61 million on Thursday, 1st July 2021.

Cryptocurrency watch

The global cryptocurrency market plunged further on Thursday, losing about $64.18 billion in market capitalisation.

  • Crypto market capitalisation recorded a decline of 4.47% to close at $1.32 trillion, indicating that crypto investors lost about $64.2 billion in one day.
  • Bitcoin also slumped with a 4.2% decline to close at $33,566.89, while Ethereum dipped 6.33% to close at $2,132.15.
  • This recent bearish trend can be tied to the regulatory scrutiny in countries like UK and China towards cryptocurrency operators.
  • Despite the ban on crypto transactions in Nigeria, it appears Nigerians are still very much in the business of trading in cryptos and especially bitcoin.
  • According to a report from CoinDance, Nigeria traded a total of 60,215 bitcoins worth over $566 million between 2015 and 2020, with many Nigerians now trading through P2P channels.

Oil prices on a bullish streak

The crude oil market maintained its bullish momentum on Thursday, as Brent Crude recorded a 1.39% gain to close at $75.63 per barrel.

  • WTI Crude also jumped by 2.4% to close at $75.23, Natural gas gained marginally by 0.3% to close at $3.61. However, Bonny Light recorded a decline of 0.6% to close at $74.16 per barrel.
  • The rally came on the back of the report that Russia and Saudi Arabi have reached a preliminary deal for OPEC+ to gradually increase output by 2 million barrels per day between August and December 2021.
  • Also, an OPEC panel has proposed a monthly increase of 0.4 million barrels per day.
  • Meanwhile, India’s oil demand is expected to return to normal by the end of 2021, having reduced its crude oil import due to the covid-19 crisis in the country.
  • According to the oil Minister of India, Dharmendra Pradhan, “There are signs of demand resurgence due to lifting of lockdowns and a gradual pickup in the economy, meaning we are confident by the end of the year, we will be in a very robust position to restore our original consumption behaviour.

External reserve

Nigeria’s external reserve declined by $47.02 million on Wednesday, 30th June 2021 to stand at $33.32 billion. This represents a 0.14% decrease compared to the $33.37 billion recorded on Tuesday

  • Nigeria’s foreign reserve fell to its lowest position since October 2017, as its year-to-date decline surpasses $2 billion, while its monthly decline for June 2021 stood at $905.5 million. This is despite the recent bullish trend recorded in the global oil market.
  • The decline may be attributed to reduced forex earnings, especially from crude oil export due to the cut in production quota, as well as the widening international trade deficit.
  • However, with the expectation of an increase in the demand for crude from India, Nigeria’s export earnings could increase during this period.
  • The CBN, which operates a managed float foreign exchange system, also periodically supports the currency using the external reserves, and a lower reserve is expected to affect the currency.

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