Naira Falls At Official Window As Dollar Shortage Persists

Naira Exchange Rate
Naira And Dollat

Monday, 11th October 2021: The exchange rate between the naira and the US dollar closed at N414.40/$1, at the Investors and Exporters window, where forex is traded officially.

Naira depreciated against the US dollar on Monday to close at N414.40/$1, representing a 0.02% drop when compared to N414.30/$1 recorded on Friday, 8th October 2021.

Similarly, the exchange rate at the parallel market closed at N564.5/$1. This is according to information obtained by Nairametrics from BDC operators in Lagos.

The local currency hit as high as N420.50 at the official market earlier in the day, as the forex shortages still persist. Vice President Yemi Osibanjo, has called on the CBN to allow the naira to reflect the realities of the market. He noted that the exchange rate was artificially low.

Trading at the Official NAFEX Window

The exchange rate depreciated against the US dollar on Monday, 11th October 2021 to close the day at N414.40 to a dollar, representing a 10 kobo drop, compared to N414.30/$1 recorded on Friday, 8th October 2021.

The opening indicative rate closed at N413.53/$1 on Monday, representing a 91 kobo gain when compared to N414.44/$1 recorded the previous trading day.

An exchange rate of N420.50 to a dollar was the highest rate recorded during intra-day trading before it settled at N414.40/$1, while it sold for as low as N404/$1 during intra-day trading.

Meanwhile, forex turnover at the official window dropped by 49.7% on Monday, 11th October 2021.

According to data tracked by Nairametrics from FMDQ, forex turnover declined from $359.48 million recorded on Friday to $184.31 million on Monday, 11th October 2021.

Cryptocurrency Watch

The world’s most popular and largest cryptocurrency, Bitcoin, was up by 5.16% on Monday evening to trade at $57,457.97, outperforming the wider crypto sector.

Bitcoin jumped to a fresh five-month high early Monday, extending its two-week price rally even though Friday’s weak U.S. jobs report failed to dampen expectations that the Federal Reserve would begin to scale back its bond-buying program in November.

The market also turned a blind eye toward the data showing supposedly bearish positioning by leveraged funds in the futures market.

Bitcoin’s continued resilience to usually bearish macro factors could be attributed to improved prospects of the US approving a futures-based Bitcoin exchange-traded fund (ETF) this month.

Meanwhile, the world’s second-largest cryptocurrency by market capitalization, Ethereum, was up by 2.35% on Monday evening to trade at $3,512.22.

Also, Nigeria traded about $32.16 million in Bitcoin in the month of September, indicating a drop compared to $44 million recorded in the previous month. The total trading volume between January and September 2021 stood at $315.76 million.

Naira Falls At Official Window As Dollar Shortage Persists

Crude oil price

Crude oil price sustained its increase earlier on Monday, with Brent crude getting close to $85, as the global energy crisis worsens.

Oil prices extended Friday’s rally into Monday, with the US benchmark topping $81 and trading just shy of $82 a barrel, as Europe and Asia continue to struggle to secure energy supply for the winter.

Europe’s natural gas prices rose on Monday, after the softness seen at the end of last week, following forecasts of colder weather.

Daniel Yergin, IHS Markit Vice Chairman and oil historian, says President Joe Biden will probably ask OPEC to pump more oil again. He says oil prices could reach $90 a barrel.

Saxo Bank’s strategy team, in a note on Monday, said crude oil started the week on a strong footing, as the global power crunch continued to raise expectations for higher gas-to-oil switching demand at a time where OPEC+ maintained its modest pace of monthly oil production increases.

Brent Crude was up by 1.53% on Monday evening to close at $83.65 per barrel, while the WTI dropped by 0.19% to trade at $80.37 per barrel. The price of Natural Gas increased by 0.95% to trade at $5.396 per barrel, and Nigeria’s crude, Bonny Light, was up by 1.29% to close at $82.18 per barrel.

External Reserve

Nigeria’s foreign reserve gained $203 million on Friday, 8th October 2021 to close at $38.387 billion compared to $38.184 billion recorded as of the previous day. The latest increase represents a 0.53% increase in the country’s foreign reserve.

The reserve gained a record $2.76 billion in the month of September 2021, while the recent gain puts the year-to-date gain at $3.01 billion. It is also worth noting that Nigeria’s reserve has gained over $1.59 billion in just 5 days into October 2021.

The recent increase in the reserve position, which has continued since the 25th of August, is in line with recent reports suggesting that Nigeria’s foreign reserve position could grow as high as $40 billion by the end of September 2021.

Although the reserves did not hit $40 billion as predicted in the previous month, it continues to record positive growth and could cross the predicted line by the end of the month, if it maintains this trajectory.

The reserve is further boosted by the receipt of $3.35 billion special drawing rights (SDR) allocation from the International Monetary Fund (IMF) which the Federal Government hopes to use to reduce budget deficits.