The Nigerian Naira declined further against the United States Dollar at the Central Bank of Nigeria’s (CBN) section of foreign exchange on Wednesday.

The local currency lost N0.29 or 0.07% against the American Dollar to exchange at N417.19. On Monday, the apex bank sold the U.S. Dollar at N416.9 to Deposit Money Banks (CBN), Investors King‘s research has shown.

But growing economic uncertainties amid the recent rate increase, high dollar demand by both politicians and genuine businesses looking to import raw materials, and weak economic fundamentals have plunged the Naira to N417.19 against its global counterpart.

In the unregulated black market, the Naira remained under pressure as it was exchanged at N630, a much-improved rate when compared to N750 it traded about a week ago.

Despite the apex bank discouraging patronage at that section of forex, Nigerians in need of forex have continued to patronise the black market. Most of them claimed the Deposit Money Banks mandated by the CBN to sell to them are merely collecting Dollar request forms without sales.

At the Investors & Exporters (I&E) forex window, the story is not any different as the local currency shed N0.29, or 0.34% from N427.90 it opens the day against the United States Dollar to close at N429.20. Investors and exporters at the I&E forex window transacted $123.78 million worth of dollars on Wednesday.

Meanwhile, the President of the Association of Bureau De Change Operators of Nigeria ABCON, Alhaji Aminu Gwadabe, in an interview on Saturday, called on the CBN to abolish the official pegged exchange rate and allow the forces of demand and supply to determine an appropriate exchange rate for the Naira.

He said “It might sound counterintuitive but the way out of the current frenzy is to abolish the official fixed exchange rate and allow the Naira to float.

“CBN should contemporaneously undertake a large-scale dollar intervention in the open market that can inspire confidence in the Naira and checkmate the current tailspin.

“Once there is a significant positive movement, the market will react and, in all probability, spur an avalanche of panic selling and further buoy the Naira,” Gwadabe said.

The Nigerian Naira traded at N610 to a United States Dollar at the parallel market popularly known as the black market in Ibadan, Oyo state on Monday.

At the Central Bank of Nigeria (CBN) foreign exchange section, used for selling and buying from deposit money banks, Naira traded at N415.9 to a U.S. Dollar.

While against the Pounds Sterling, it exchanged at N492.0929 and N416.1495 to a European common currency.

Crude Oil

Oil prices appreciated on Monday amid rising uncertainties and concerns over the supply of the commodity.

Brent crude oil, against which Nigerian crude oil is priced, appreciated to $104.32 following a decline to $94 a barrel on Thursday when data showed that the U.S. inflation rate rose at the fastest pace in over 40 years to 9.1% in the month of June.

According to Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA, “Supply risks remain evident in international markets, and futures curves remain in backwardation. Despite the ructions in the speculative futures markets, the real-world dynamic remains as supportive of oil prices as ever. If Russian doesn’t switch gas exports back on to Europe at the end of the week, Brent crude could once again, find itself back near $110.00 a barrel.”

Cryptocurrency

Bitcoin and other cryptocurrency extended their gains on Monday as capital inflow into the space picked with rising global risk and uncertainties.

The value of Bitcoin, the world’s most dominant cryptocurrency, gained 3.81% to $22,297.97 on Monday. While, the token of Ethereum, Eth expanded by 7.82% to $1,472.92 a coin.

The value of other cryptocurrencies also surged even with the decline in stock value and jumped in global uncertainties.

The United States Dollar (USD) exchange rate to European common currency (Euro) was the exact same in the early hours of Tuesday for the first time in 20 years.

The Euro-USD exchange rate opened at 1.003 on Tuesday and dropped to 0.999 before moderating to 1.0036 at the time of writing.

The slowing global economy amid rising interest rates has made the United States Dollar attractive to global investors who were looking to avoid the negative impact of the projected economic recession and ensure they have in their possession operating capital for possible re-entry at lower price levels or to avoid the impact of persistent increase in borrowing costs (interest rates) in the near-term.

As shown below, the Euro-USD pair started declining on February 10, 2022 when the United States announced that Russia was planning to invade Ukraine.

The invasion, which eventually happened on February 24, has disrupted the global economy, bolstered commodity prices, and increased global risks and uncertainties. In an effort to rein in the high inflation rate, economies started raising interest rates in a move to curb escalating inflation rates.

These aggressive increases have started dragging on new investments, new job creation, consumer spending, retail sales and export orders. And financial experts are now predicting it could get worse with Russian sanctions.

Western nations are working on imposing additional oil sanctions on Russia. This, JP Morgan predicted could push oil prices above $350 a barrel and further complicate the global economy.

All the aforementioned are responsible for the increase in dollar strength against Euro and other global currencies to over 20 years high.