- Power Firms Want Forex at Official Rate
Power firms should be given preferential treatment with respect to foreign exchange, which is needed to procure equipment such as transformers, meters and turbines, the Managing Director, Ibadan Electricity Distribution Company Plc, Mr. John Donnachie, has said.
Donnachie stated this on Monday at a briefing in Ibadan after the tour of the Eleyele 2x15MVA 33/11KV injection substation whose upgrade, according to him, will be completed later this month.
The naira has weakened against the dollar in recent time, currently trading around 460-470 to the dollar at the parallel market and 305.5 per dollar at the interbank market.
The IBEDC MD, who said the company could not get forex at the official rate, also decried the payment for gas supply for power generation in dollars.
He said, “Fundamentally, the liquidity issue in the power sector is very well known. We are short of at least N1tn in the industry. What happens is that we pay less to the Nigerian Bulk Electricity Trading Plc, which is creating the liquidity issue for everyone else in the industry.
“Who is going to take that exchange rate risk in the industry? That is the question we haven’t answered yet.”
Donnachie put the company’s allowable capital expenditure at N5.5bn for this year, saying it was based on the old exchange rate of N198 to the dollar.
Naira Maintains Stability at Official Fx Window
The Naira maintained its streak on Monday, settling to close at N415.07 per dollar. This is the same price at which the Nigerian currency has closed for the last few days, according to the Investors and Exporters window where the Naira is traded officially.
While there have been very marginal differences in the opening prices over the last days, in the end the currency has come around to settle down at the same price (N415.07 per dollar) at the close of each day.
On Friday, the Naira opened at N413.71 per dollar which represented a 0.03% change from the previous day, according to the Investors and Exporters window. On Monday, the currency opened at a similar price, starting the day off at N413.75 per dollar.
Although there have been minimal changes in the opening prices, generally the currency opens at similar prices, with backgrounds of N413 per dollar and changes of only a few kobo.
While the general opening and closing prices didn’t witness much change, the same cannot be said for the Spot and Forward rates. On Friday, the Spot rate was between N404 per dollar and N444 per dollar. However, Monday saw a significant change in the Spot rate. Across all transactions that occurred on Monday, the naira reached a high of only N405 per dollar (N1 lower than Friday’s high), and went on to reach a low of N456.97 per dollar (N12 lower than the previous day).
The Forward rate – for future transactions that were agreed upon on Monday – saw a more significant change. Friday’s Forward rate high was recorded at N411 per dollar, but on Monday that fell greatly to N452 per dollar. However, Monday’s Forward rate lowest was N453 per dollar, about N2 better than the N455 per dollar at which it traded on Friday.
The total turnover of the dollar recorded on Monday sat at $256.69 million. This was considerably higher than the turnover of $215 million that was recorded on Friday.
At the parallel market on Monday, the Naira fell to close at N569 per dollar from the N560 per dollar at which it traded the previous day. After that exponential rise to about N535 per dollar, the parallel market is seeing the Naira return even closer to the N575 per dollar price at which it had sat for a while.
Naira Stays Flat at Official Market
After closing at N415.07 per dollar on Thursday, the Naira maintained a flat rate and went on to close at the exact same price on Friday. This is according to the data released by the FMDQ group, on the group’s official website.
This connotes a certain stability around the currency, as the recent rates at which the currency has been closing at in recent days and weeks have hovered around this particular price range. It further strengthens the idea that the festive period will see the Nigerian currency trade at that range.
The FMDQ group as usual also updated the Forward rate and the Spot trade of the Naira’s trades on Friday. The prices appeared to have returned to some of the usual, standard rates which they consistently traded for a while.
The Spot rate returned to its usual price range, falling as low as N444 per dollar and rising up to N404 per dollar. What this means is that throughout the entire day, the Naira traded at different prices at different times, trading between N404 per dollar and N444 per dollar.
For the Forward rate, a high of N411 per dollar was reached while a low of N455.97 per dollar was gotten. The Forward rate, which is used for future transactions generally trades at lower prices than the Spot rate.
On Friday, the total turnover of the dollar sat at $215.47 million. Turnover refers to the amount of the currency that is involved in the trade throughout the entire day. Everything that was traded on Friday amounts to 215 million dollars. This was a huge increase from the turnover of the previous day, which sat at $98 million.
It has been reported that in a bid to save the naira, the Central Bank of Nigeria threw a little over $2 billion into the Investors & Exporters window in the seven months to July this year (2021). In the corresponding period last year, the apex bank only injected $628 million into the window.
Haven Currencies Gained Across the Board as Investors Assesses New COVID Variant
Investors are moving their funds to known safe-haven currencies to curb risk exposure while they evaluate the effect of the new covid variant on global financial markets.
Two cases of the new Covid variant called B.1.1.529 that emanated from South Africa were reported in Hong Kong on Friday, increasing concerns it could hurt global economic recovery and compel nations to start closing their borders going into the new year.
Leading safe-haven currency, the Japanese Yen gained against the United States Dollar to 113.151 at 8:40 pm Nigerian time, down from 115.450 it attained on Thursday as shown below.
Similarly, the Swiss Franc outperformed other currencies as its attractiveness surged among global investors looking to avert catastrophe amid rising global uncertainties.
Swiss Franc rose against the United States Dollar to 0.92187 from 0.93604 it peaked on Thursday before news that the United Kingdom and other nations were considering shutting their borders.
The Euro rebounded against the United States Dollar after plunging from 1.18905 it traded in August to 1.12039 before paring losses to 1.13129 when the news of new covid variant became a concern.
Surprisingly, gold, a known haven asset, failed to sustain its earlier gain and pulled back from $1815.46 to $1788.10 at the time of writing. Another indication of rising global uncertainty.
Even experts like Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA, had earlier predicted that gold will shine given its characteristics as a haven asset.
He said “Times like this are when gold shines and we’re seeing investors flock back to an old reliable friend today. It has pulled a little off its highs after hitting $1,815 earlier in the session but it remains above $1,800 at the time of writing. It’s an interesting one for gold and bonds, as the situation now is very different from last year.”
Investors however seems to be dumping the tradition risk aversion commodity for something more stable, especially with bitcoin and other cryptocurrencies now doing better number in terms of gain in a period like this.
Crude oil has dropped more than 5 percent or $10 today as energy traders aggressively closed the positions to better assess the situation.
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