Naira Sustains gains as ‘Election dollars’ flood Black market

Forex
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Tuesday, April 07, 2015 4.59PM/Research

 

The review of events in the parallel market for foreign exchange highlights the following key developments:

       The naira continues to sustain its gains in the parallel market since the conclusion of the presidential elections and is now exchanging around N199/$1. The gains recorded so far in the black market are due largely to ‘elections dollars’ that have made their ways to the parallel market.

  •         Volume buyers, however, may not be able to buy cheap at the prevailing rates

  •         The naira recorded 0.5% gains against the dollar to sustain its current momentum in the parallel market.

  •         Official rate remains at N197/$1.
 

Today, the naira exchanged for N199 to a dollar while the pounds sterling and Euros traded for N300/£1 and N220/€1 respectively at the parallel market

 

EXCHANGE RATE
Today, the naira traded at N199 to a dollar and has exchanged above N200 since January 22nd, 2015. The value of the naira is fast appreciating following renewed confidence and increase in dollar supply in the black market from election spending. The official Naira/USD exchange rate, however, remains at N197/$1.

The value of the naira has since the initial CBN devaluation traded between the band of N173 and N230 to USD1 before falling below the N200 mark today. The graph below 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.


Source: Fieldwork

OIL PRICE
Oil price has also witnessed heavy decline since the last quarter of 2014. However, the commodity is beginning to gather some momentum in upward movement as it recorded a gain of +4.62%, when compared to the previous day’s price of $55.58 to close at $58.15 today. The initial huge decline in oil price caused the Federal Government of Nigeria to review downwards its benchmark oil price for 2015 budget.

Today’s Brent crude price continues to trade above the agreed 2015 budget oil benchmark price of $53 per barrel by the national assembly. You would recall that the Federal government of Nigeria 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, which was proposed in the submitted 2015 appropriation bill to the national assembly.



Today, the price of Brent Crude oil (Nigeria’s crude oil type) was USD58.15 per barrel while the other variant of crude (WTI) traded at $52.54 per barrel as at 10.48ET today.

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