Forex market tumbles as CBN Closes rDAS window; huge implications to follow

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Wednesday, February 18, 2015 5.48PM / Research

 

A review of events in the market today, concerning the activities at the foreign exchange market confirmed the following key developments:

    Official closure of the rDAS/wDAS foreign exchange window by the Central Bank of Nigeria, channeling all demand for foreign exchange to the interbank foreign exchange market. This leaves consumers with just two access way to the dollar i.e the interbank and parallel market. The implications of this will be massive given the strong demand for dollar in the Nigerian economy.

         Scarcity of foreign currencies has increased in the parallel market as demand soars

         The CBN sells dollar at the interbank market around N198 to a dollar

         The difference between the CBN controlled interbank rate of N198 and the official rate of N168 has created a big arbitrage in itself.

 

Today, the naira exchanged for N215 to a dollar in the parallel market as forex scarcity continues while the pounds sterling traded still trades high at around N315 to N320 for one pound.

 

EXCHANGE RATE

Our daily exchange rate monitor of the performance of the naira against the dollar following the devaluation of the Nigerian currency in November 2014 continues to highlight how the naira has fared against the dollar over the months.

 

Today, the naira traded at N215 to a dollar. The value of the naira has depreciated significantly mainly because of the dwindling oil revenue from falling global oil prices and speculative pressures on the naira. Following the initial devaluation of the naira by 8% and the falling value of the naira, some analysts have predicted more devaluation in weeks to come.


Source: Fieldwork

The value of the naira has since the CBN’s devaluation traded between N173 and N215 to a dollar in the black market to record a new low today. The Nigerian naira traded at N215/USD1 today, to record a new low. The graph above shows in pictorial form the volatility of the naira against the dollar in the black market for the last 3weeks as it compares with the official rate, which has remained stable at the official rate of N168/$1.

OIL PRICE

Oil price has also witnessed heavy decline since the last quarter of 2014. The commodity price is however beginning to rise in recent time as it recorded a gain of +0.5%% to close at $61.19 today, February 18th, 2015. The initial huge decline in oil price caused the Federal Government of Nigeria to review downwards its benchmark oil price for 2015 budget.

 

The benchmark oil price for the yet-to-be-passed 2015 budget is $65. You would recall that the Federal government initially set the benchmark price for 2015 budget at $78 before the first downward review to $73 of which circumstances forced it to review further down to $65 per barrel.



Today, the price of Brent Crude oil (Nigeria’s crude oil type) was $61.19 while the other variant of crude (WTI) traded at $53.53 per barrel the previous day.

 

To View Commodity Prices Click Here.. 


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