Naira weakens the most in 3 months as dollar shortages persist

Nigeria’s currency on Tuesday weakened to its lowest level in three months, as shortage of dollars persist in the foreign exchange market.

After trading on Tuesday, naira lost 0.59 percent of its value, closing at N411.63k per dollar, from N409. 20k closed the previous day at the Investors and Exporters (I&E) forex window, data from the FMDQ indicated.

Prior to now the local currency recorded its lowest depreciation in December 31, 2020 when it fell to N410.25k per dollar.

Naira depreciation was attributed to strong demand for dollars by the end users to meet their various obligations. The foreign exchange market has been under pressure since March 2020 following a sharp drop in oil prices as a result of Covid-19 pandemic.

Foreign exchange sales to authorised dealers by the Central Bank of Nigeria (CBN) was US$1.27 billion in November 2020, a decrease of 18.5 per cent and 63.1 per cent below the levels in the preceding month and corresponding month of 2019, respectively, a report by the Apex bank showed.

Nigeria’s external reserves have declined to $34.9 billion as at March 1, 2021 according to the data on the CBN website.

The price of oil has improved as the price of Brent Crude, which fell below $20 per barrel last year has risen to $63.96 per barrel as at 6.52pm on Tuesday.

Currency traders who participated in the trading on Tuesday maintained bids at between N388.25k and N415.00k/$.

The daily foreign exchange market declined by 142.69 percent to $59.17 million on Tuesday from $24.38 million closed on Monday at the I&E window.

At the black market, naira gained 0.41 percent as the dollar closed at N480 on Tuesday as against N482 closed on Monday.

Naira steadied at N480 to the dollar at the Bureau De Change (BDC) segment of the foreign exchange market. Over 5,000 BDCs across the country received dollar disbursement from the CBN on Tuesday.

The premium between the average interbank and BDC rates widened to 24.1 per cent in November 2020 from 20.5 per cent in October 2020. The premium between the BDC and I&E, also, widened to 22.2 per cent from 19.0 per cent, in the preceding month, the CBN report stated.

To help liberalise and improve liquidity in the foreign exchange market, the CBN announced the amendment of procedures for receipt of diaspora remittances on November 30, 2020. The beneficiaries of remittances thenceforth, had the option of receiving funds in foreign currency cash or transferred into their ordinary domiciliary accounts.

At the money market, the Nigeria treasury bills secondary market closed on a flat note on Tuesday, with the average yield across the curve remaining unchanged at 1.49 percent, a report by FSDH noted.

Average yields across short-term, medium-term, and long-term maturities closed at 0.57 percent, 1.48 percent, and 2.01 percent, respectively.

The Overnight (O/N) rate decreased by 1.92 percent to close at 4.83 percent on Tuesday as against the last close of 6.75 percent, and the Open Buy Back (OBB) rate decreased by 1.67 percent to close at 4.33 percent from 6.00 percent on the previous day.