Naira gains at official market as external reserve rises for the first time in over 11 weeks
- 9th July 2021
- Posted by: Hakeem
- Category: Currencies
Thursday, 8th July 2021: The exchange rate between the naira and the US dollar closed at N411.25/$1 at the Investors and Exporters window, where forex is traded officially.
Naira appreciated against the US dollar on Thursday to close at N411.25/$1. This represents a 0.05% drop when compared to the N411.45/$1 that was recorded on Wednesday, 7th July 2021.
Meanwhile, 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 as external reserve rose for the first time since April 2021, by N2 million
The local currency maintained gained at the official window despite a 67.7% drop in dollar supply.
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 N411.25/$1, representing a 20 kobo drop when compared to the N411.45/$1 that was recorded at the previous trading day’s session.
- The opening indicative rate closed at N411.75 to a dollar on Thursday, July 8, 2021. This represents a 4 kobo gain when compared to the N411.79 to a dollar that it closed with on Wednesday, July 7, 2021.
- An exchange rate of N420.86 to a dollar was the highest rate recorded during intra-day trading before it settled at N411.25/$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 dropped by 67.7% on Thursday, 8th July 2021.
- According to data tracked by Bigwig FX from FMDQ, forex turnover declined from $260.51 million recorded on Wednesday, 7th July 2021 to $84.06 million on Thursday, 8th July 2021.
The world’s most popular and biggest cryptocurrency, Bitcoin, was down by 0.66% on Thursday evening to close at $33,136.63, amid China’s crackdown.
- Goldman Sachs had hinted at the possibility of Ethereum overtaking Bitcoin as the dominant cryptocurrency.
- The bank said in the note that Ether currently looks like the cryptocurrency with the highest real use potential as Ethereum, its native platform is the most popular development platform for smart contract applications.
- The endorsement comes after Goldman Sachs published a report in May discussing crypto’s potential as an asset class.
- U.S. banks have increasingly begun to accept Bitcoin as it gains traction with more mainstream investors but have been slower to adopt Ether. Morgan Stanley was one of the first banks to offer Bitcoin funds, and Goldman Sachs said in March it was developing cryptocurrency investments as well.
- Ethereum, the second-largest cryptocurrency by capitalization, dropped by 4.23% to close at $2,153.82.
Crude oil prices dropped on Thursday evening with Brent Crude closing at $74.08 per barrel, down by 0.05% after rising earlier in the day as Energy Information Administration (EIA) data beats expectations.
- Crude oil prices rose higher earlier after the EIA reported an inventory draw of 6.9 million barrels for the week to July 2. This is compared with a draw of 6.7 million barrels for the previous week.
- Analysts had expected the EIA to report a 3.925-million-barrel draw in crude oil inventories for the week.
- Whatever the EIA estimates, they are unlikely to move prices very much this week or for very long, not with OPEC+ cancelling its last meeting without making a decision about future production, prompting abundant speculation that this may be the end of the cartel.
- Oil prices continue to fall as uncertainty coming from the OPEC+ deadlock and fears of COVID variants spreading fast weighed on the market.
- WTI Crude rose by 0.05% to close at $72.98, Natural gas lost 0.43% to close at $3,672, Bonny Light recorded a decline of 0.60% to close at $74.16 per barrel, while OPEC basket dropped by 3.11% to close at $73.58.
Nigeria’s external reserve rose by $2 million on Wednesday, 7th July 2021 to stand at $33.120 billion, the first increase in over 11 weeks. This represents a 0.01% increase compared to the $33.118 billion recorded on Tuesday.
- 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.