Naira falls to N506/$ at black market as dollar supply slides by 5.77%

Friday 16th July 2021: The exchange rate between the naira and the US dollar closed at N410.38/$1 at the official forex market.

Naira appreciated against the US dollar on Friday, 16th July 2021 to close at N410.38/$1. This represents an 82 kobo gain when compared to N411.2/$1 that was recorded on Thursday, 15th July 2021.

At the parallel market, however, the naira depreciated against the US dollar at an exchange rate of N506/$1, a loss of N1 when compared to the N505/$1 that was recorded on Thursday 15th July 2021 and the first depreciation since Friday, 9th July 2021.

On the other hand, the dollar supply at the official forex market dropped by 5.77% on Friday to stand at $116.55 million.

Trading at the official NAFEX window

Naira appreciated against the US dollar at the Investors and Exporters window on Friday to close at N410.38/$1 as against the N411.2/$1 recorded on Thursday, 15th July 2021.

• The opening indicative rate stood at N411.20/$1 on Friday, representing a 3 kobo drop when compared to N411.17/$1 recorded in the previous trading session.
• An exchange rate of N412.76/$1 was the highest rate recorded during intra-day trading before it settled at N410.38/$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 5.77% on Friday, 16th July 2021.
• According to data tracked by Nairametrics from FMDQ, forex turnover declined from $123.69 million recorded on Thursday, 15th July 2021 to $116.55 million on Friday, 16th July 2021.

Crude oil

The crude oil market extended its bearish run on Sunday, 18th July 2021 as Brent Crude dropped below the $73 per barrel mark as the market assesses the impact of higher crude supply from the OPEC+ group after a reported compromise between key OPEC members, Saudi Arabia and the United Arab Emirates (UAE).

• Brent Crude dropped significantly by 1.37% to close at $72.58 per barrel, WTI also dropped significantly by 1.30% to close at $70.88, Natural Gas rose by 0.90% to close at $3.707, while OPEC basket dropped by 2.84% to close at $73.15 per barrel.
• However, the Bonny Light rose by 1.44% to close at $75.23 per barrel.
• OPEC and its allies agreed to gradually add more oil supplies to the market, ending a two-week spat between Saudi Arabia and the United Arab Emirates.
• The agreement means the cartel will boost output by 400,000 barrels a day each month from August, continuing until all of its halted output has been revived.
• The multifaceted agreement gives consumers a clearer view of how quickly OPEC+ will restore the 5.8 million barrels a day of production it’s still withholding, since making deep cuts last year in the initial stages of the pandemic.
• Meanwhile, earlier, oil prices recorded their worst week since March under the double blow of additional OPEC supply coming to markets and unfavourable fuel inventory data from the United States.
• The Energy Information Administration (EIA) reported yet another sizeable crude oil inventory draw with builds in both gasoline and middle distillates, at 1 million barrels and 3.7 million barrels, respectively.

External reserve

Nigeria’s foreign reserve rose by $1 million on Thursday, 15th July 2021, to close at $33.104 billion as against the N33.103 billion that was recorded on Wednesday, 14^th July 2021.

Nigeria’s reserve had recorded a significant reduction in recent times, losing about $219.42 million month-to-date and about $2.27 billion from January to date.

The change in tide to a positive is an indication of increased forex earnings, which would come as a relief for Nigeria, as an increase in external reserve will help Nigeria meet up with pent-up financial obligations.

The increase will also serve as a relief for Nigeria’s exchange rate, which had been on a downturn lately, crossing the N500/$1 mark at the parallel market.

Credit: Nairametrics