Wednesday, 7th July 2021: The exchange rate between the naira and the US dollar closed at N411.45/$1 at the Investors and Exporters window, where forex is traded officially.
Naira remained stable against the US dollar on Wednesday to close at N411.45/$1. This was the same rate that was recorded on Tuesday, 6th July 2021.
Also, the naira maintained stability at the parallel market, as it closed at N503 to a dollar. This was the same rate that was recorded in the previous trading session. However, Nigeria’s external reserve continues to plunge, as it heads to its lowest position in four years with a year-to-date decline of over $2 billion.
The local currency maintained stability across forex markets as dollar supply rose significantly by 135.4%.
Trading at the official NAFEX window
Naira remained stable against the US dollar at the Investors and Exporters window at Wednesday’s trading session to close at N411.45/$1, representing the same rate that was recorded at the previous trading day’s session.
- The opening indicative rate closed at N411.79 to a dollar on Wednesday, July 7, 2021. This represents a 29 kobo drop when compared to the N411.50 to a dollar that it closed with on Tuesday, July 6, 2021.
- An exchange rate of N420.86 to a dollar was the highest rate recorded during intra-day trading before it settled at N411.45/$1, while it sold for as low as N396/$1 during intra-day trading.
- Meanwhile, forex turnover at the Investors and Exporters (I&E) window rose significantly by 135.4% on Wednesday, 7th July 2021.
- Forex turnover increased from $110.67 million recorded on Tuesday, 6th July 2021 to $260.51 million on Wednesday, 7th July 2021.
Cryptocurrency watch
The world’s most popular and biggest cryptocurrency, Bitcoin, was down by 2.80% on Wednesday evening to close at $33,303.75, amid China’s crackdown.
- Bitcoin price consolidation may be coming to an end as it may soon move out of its seven-week trading range of $30,000 to $40,000, with an indicator tracking the cyclical nature of price volatility suggesting that a big move is overdue.
- An analyst had said that Bitcoin prices had crashed but predicted that CoinBase stock might still double.
- Meanwhile, the Chief Executive Officer of BitGo, Mike Belshe, said that the recent China clampdown on cryptocurrency mining and trading was good for the long-term of Bitcoin.
- The Securities and Exchange Commission faces an important decision about cryptocurrency, whether to approve a Bitcoin exchange-traded fund. Although it would be best to see such ETFs approved only after Congress has strengthened crypto regulation generally. The likelihood of that happening in the near future is low.
- Ethereum, the second-largest cryptocurrency by capitalization, dropped by 3.38% to close at $2,247.08.
Oil prices
Crude oil prices dropped on Wednesday as the oil rally ground to a halt with Brent Crude closing at $72.19 per barrel, down by 0.33%. The oil price plunge continues amid OPEC+ deadlock.
- Oil prices continued falling on Wednesday, following the sharp losses incurred the previous day after the market started to assess what the OPEC+ deadlock would mean for immediate oil supply, supply-demand balances, and the future of the alliance.
- Saxo Bank, in a note on Wednesday, said that the risk of no-deal raising noncompliance, White House urging a compromise, a rapidly spreading virus variant, a very overbought market, and a stronger dollar all helped trigger the losses in the oil market.
- The oil market continues to assess the repercussions of the ongoing OPEC+ impasse on supply at a time when summer demand is rising.
- The American Petroleum Institute (API) on Wednesday reported a draw in crude oil inventories of 7.983-million barrels for the week ended July 2.
- Meanwhile, 3 OPEC+ sources say Russia is leading efforts to close divisions between Saudi Arabia and the United Arab Emirates to help strike a deal to raise oil output in coming months, with OPEC and its allies yet to set a date for their next oil policy meeting.
- WTI Crude dropped by 0.48% to close at $71.85, Natural gas lost 0.36% to close at $3,583, Bonny Light recorded a decline of 0.60% to close at $74.16 per barrel, while OPEC basket rose by 0.30% to close at $75.94.
External reserve
Nigeria’s external reserve declined by $26 million on Tuesday, 6th July 2021 to stand at $33.118 billion. This represents a 0.08% decrease compared to the $33.144 billion recorded on Monday.
- Nigeria’s foreign reserve fell to its lowest position since October 2017, as its year-to-date decline surpassed $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 can be attributed to a drop in inflows by foreign investors and a decrease in forex earnings due to a cut in crude oil export as a result of OPEC production quota, as well as the widening international trade deficit. This invariably puts a lot of pressure on the local currency.
- The pressure on the external reserve is still continuing as uncertainty in the oil market appears to persist, with OPEC still unable to reach an agreement on an increase in production quota.
- 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.