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Naira appreciates at official market as external reserves increase by $620 million in a day

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Tuesday, 12th October 2021:  The exchange rate between the naira and the US dollar closed at N414.30/$1, at the Investors and Exporters window, where forex is traded officially.

Naira appreciated against the US dollar on Tuesday to close at N414.30/$1, representing a 0.02% gain when compared to N414.40/$1 recorded on Monday, 11th October 2021.

Similarly, the exchange rate at the parallel market closed at N568/$1, representing a N6.50 drop when compared to the N574.50 that was recorded the previous trading day. This is according to information obtained by Nairametrics from BDC operators in Lagos.

The local currency gained at the official market as the external reserves continued with its increase, gaining about $620 million in a single day.

The local currency hit as high as N420.50 at the official market earlier in the week, as the forex shortage persists. Vice President Yemi Osibanjo, also called on the CBN on Monday, to allow the naira reflect the realities of the market. He noted that the exchange rate was artificially low.

Trading at the official NAFEX window

The exchange rate appreciated against the US dollar on Tuesday, 12th October 2021 to close the day at N414.30 to a dollar, representing a 10 kobo gain, compared to N414.40/$1 recorded on Monday, 11th October 2021.

The opening indicative rate closed at N413.64/$1 on Monday, representing an 11 kobo drop when compared to N413.53/$1 recorded the previous trading day.

An exchange rate of N420.15 to a dollar was the highest rate recorded during intra-day trading before it settled at N414.30/$1, while it sold for as low as N405/$1 during intra-day trading.

Meanwhile, forex turnover at the official window dropped by 16.8% on Tuesday, 12th October 2021.

According to data tracked by Nairametrics from FMDQ, forex turnover declined from $184.31 million recorded on Monday to $153.39 million on Tuesday, 12th October 2021.

Cryptocurrency watch

The world’s most popular and largest cryptocurrency, Bitcoin, was down by 2.36% on Tuesday evening to trade at $56,055.13.

A flurry of selling briefly pushed Bitcoin to its biggest intraday drop in more than two weeks. While the largest cryptocurrency recouped some of its losses, it ended lower for its first drop in four days.

Even with the drop, the largest cryptocurrency by market value is up more than 90% year to date and remains within sight of its all-time high of about $65,000 reached in April. For the month alone, Bitcoin has climbed more than 25%.

The International Monetary Fund, in a new report, has warned that cryptocurrency still poses considerable challenges to market conditions globally although it has the ability to improve the global payment system.

Meanwhile, the world’s second-largest cryptocurrency by market capitalization, Ethereum, was up by 0.35% on Tuesday evening to trade at $3,506.66.

Also, Nigeria traded about $32.16 million in Bitcoin in the month of September, indicating a drop compared to $44 million recorded in the previous month. The total trading volume between January and September 2021 stood at $315.76 million.

Crude oil price

The volatility of the oil market came to play on Tuesday as oil prices switched between gains and losses in choppy trade as investors assessed how a global power crisis would affect demand this winter.

Shortages of natural gas and coal ahead of winter in the Northern Hemisphere have prompted some switching of fuels such as diesel and fuel oil in the power sector.

The International Monetary Fund (IMF) expressed concern that the global economic recovery had lost momentum with rising costs of food and fuel cited as some of the reasons.

Caution from the Organization of Petroleum Exporting Countries and its allies in restoring supply has pushed prices higher along with fuel switching.

Brent Crude was down by 0.27% on Tuesday evening after rising earlier in the day to trade at $83.42 per barrel, while the WTI dropped by 0.26% to trade at $80.43 per barrel. The price of Natural Gas dropped by 0.94% to trade at $5.453 per barrel, and Nigeria’s crude, Bonny Light was up by 1.34% to close at $83.28 per barrel.

External reserve

Nigeria’s foreign reserve gained $620 million on Monday, 11th October 2021 to close at $39.007 billion compared to $38.387 billion recorded as of the previous day. The latest increase represents a 1.6% increase in the country’s foreign reserve.

The reserve gained a record $2.76 billion in the month of September 2021, while the recent gain puts the year-to-date gain at $3.63 billion. It is also worth noting that Nigeria’s reserve gained over $2.21 billion in just 6 days into October 2021.

The recent increase in the reserve position, which has continued since the 25th of August, is in line with recent reports suggesting that Nigeria’s foreign reserve position could grow as high as $40 billion by the end of September 2021.

Although the reserves did not hit $40 billion as predicted in the previous month, it continues to record positive growth and could cross the predicted line by the end of the month, if it maintains this trajectory.

The reserve is further boosted by the receipt of $3.35 billion special drawing rights (SDR) allocation from the International Monetary Fund (IMF), which the Federal Government hopes to use to reduce budget deficits.

Disclaimer: Nairametrics does not set or determine forex rates. The official NAFEX rates are obtained from the website of the FMDQOTC. Parallel market rates are obtained from various sources including online media outlets. The rates you buy or sell forex may be different from what is captured in this article.

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