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Naira Stands Firm as Potential COVID-19 Vaccine Raised Oil Price

Naira Stands Firm as Potential COVID-19 Vaccine Raised Oil Price

Due to potential COVID-19 vaccine discovery, Nigerian local currency, Naira, stands firm at the Investors and Exporters Window at ₦386/$ as oil prices rallied at the international market.

Similarly, exchange rate closed flat at ₦381 to a dollar at the Interbank Foreign Exchange market amid weekly injections.

Following its intervention stance, the Central Bank of Nigeria (CBN) injected $210 million into the forex market.

Total sum of $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), $55 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for invisibles.

However, Naira weakened against the dollar at the Bureau De Change (BDC) and parallel markets by 0.44% and 1.29% respectively.

The currency then close at ₦460/$ at BDC and ₦470/$ at parallel market. 

The Naira to dollar exchange rate appreciated for most of the foreign exchange forward contracts.

Contracts for 1 month, 2 months, 3 months and 6 months rates fell by 0.06%, 0.12%, 0.18% 0.40% and 0.64% respectively.

It then closed at ₦386.11/$, ₦386.34/$, ₦386.67/$, 386.87/$ and ₦387.33/$ respectively.

However, the spot rate closed flat at ₦381.00/$.

Cowry Asset Management expects exchange rate to remain stable at BDC amid sustained intervention by CBN next week.

Analysts also expect appreciation at the Investors and Exporters FX Window (I&E FXW) given the recent rally in crude oil prices at the international market.

In its monthly report, OPEC+ revised down its oil demand forecasts for the remainder of the year and 2021 as a result of a weaker-than-expected economic outlook and a surge in COVID-19 cases.

OPEC+ expects oil demand to contract about 9.8 million barrel per day (m/bpd) in 2020, a 0.3m/bpd from last month’s assessment while in 2021, oil demand growth is projected to rise by 6.2m/bpd.

However, given a potential COVID-19 vaccine, oil prices posted gains this week rising 8.6% w/w to $40.32bbl.

Meanwhile, the external reserves declined 0.1% ($31.6m) to $35.6bn from $35.7bn last week.

At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts of the Naira settled at $9.93bn, up $19.1m (+0.2%) from $9.92bn in the prior week.

The OCT 2021 instrument at contract price of ₦420.05 received the most buying interest in the week with additional subscription of $3.5m which took total value to $43.9m.

On the other hand, the MAY 2021 instrument at contract price of ₦405.86 was the least subscribed with additional subscription of $1.2m bringing the total value to $726.1m.

“Next week, we expect stronger FX demand due to the easing of lockdown across major economies to put pressure on the exchange rate in the near term”, Afrinvest said.

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Naira Stands Firm as Potential COVID-19 Vaccine Raised Oil Price

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