The United States Dollar continues its bullish run against the Nigerian Naira on the black market on Friday.
The American Dollar gained N5 against the Nigerian Naira to exchange at US$1 to N480 across key black markets in Nigeria.
The US Dollar has been on a bullish run since COVID-19 pandemic plunged oil prices and distrupted Nigeria’s foreign revenue generation at a time global supply chains were grounded and economies shut to curb the spread of ravaging COVID-19.
The Central Bank of Nigeria devalued the Naira twice to accommodate the nation’s new reality and ease pressure on the weak foreign reserves, still rising capital flight among foreign investors looking to exit the economy and weak foreign direct investment impedes the apex bank’s ability to service the economy with enough US dollar.
Therefore, persistent scarcity due CBN’s failure to supply enough liqudity in an economy that depends on import for almost 90 percent of its consumption plunged the Naira value in recent months.
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.
Naira Faces Temporary Stability at the Official Window
After closing at N415.07 on Wednesday, the currency temporarily rose to open at N413.58 per dollar on Thursday, before returning to close at N415.07 per dollar by the end of the day. This is according to the data obtained from the Investors and Exporters window.
The last few days have seen the emergence of marginal changes in the value of the Naira against the dollar, with the changes not being more than N1 or N2 at a time. The constant flux of the Naira at a marginal rate seems to suggest that the currency will remain at this level over the upcoming festive period.
This could however be changed, but only by drastic action on the part of the Central Bank of Nigeria.
The FMDQ website shows the Spot rate and Forward rate of the Naira, with the Spot rate representing the range of prices at which the Naira traded throughout an entire day. For Thursday, the Naira traded between N406 per dollar and N452 per dollar.
This means that all the dollar transactions that took place across Thursday took place with the Naira trading at a high of N406 per dollar and at a low of N452 per dollar. However, at the end of the day the Naira had settled down at N415.07 per dollar.
The Forward rate refers to the value of the Naira against the dollar which applies to transactions which have been agreed to take place in the future, and not immediately. Thursday’s forward rate was particularly low, with its highest coming at N452.61 per dollar, and the lowest falling in at N453.75 per dollar.
This could particularly discourage individuals or groups who would have been seeking to agree on some future deals on Thursday, with the low prices not spelling positivity for trade.
The turnover of the dollar recorded on Thursday sat ta $98.07 million, meaning that the entirety of the dollar traded across all the rates amounted to a little less than $100 million.
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