Naira falls to record low at black market as forex supply drops

The naira slumped to a new record low against the dollar at the black market on Monday days after the CBN banned microfinance banks from foreign exchange transactions as dollar supply dropped significantly by 62%.

The naira further depreciated at the parallel market as it closed at N527/$1 on Monday, 30th August 2021, representing a N3 drop when compared to N524/$1 recorded on the previous trading day.

It however remained stable at the Investors and Exporters window where forex is traded officially, closing at N411.63/$1.

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According to Reuters, the stoppage of forex allocation to BDC operators by the CBN has drained liquidity in the black market and could further weaken the naira.

Meanwhile, forex turnover at the Investors and Exporters (I&E) window dropped by 62.2% on Monday, 30th August 2021.

According to data from FMDQ, forex turnover declined from $216.52 million recorded on Friday to $81.81 million on Monday, 30th August 2021.

Nigeria’s foreign reserve rose by $91 million as it recorded its third increase in over 2 weeks to close at $33.662 billion on Friday, 27th August 2021, compared to $33.571 billion recorded as of the previous day. The latest increase represents a 0.27% boost in the country’s foreign reserve.

In the same vein, the reserve level has also gained $259 million month-to-date compared to $33.403 billion recorded as of the beginning of the month.

READ ALSO: Naira falls at official forex market

However, its year-to-date change shows a $1.891 billion loss compared to $35.37 billion recorded as of 31st December 2021.

While recent reports have suggested that Nigeria’s foreign reserve position could grow as high as $40 billion by the end of September 2021, the recent decline in the external reserve could be attributed to the decline recorded in the global crude oil market in recent weeks.

Meanwhile, Brent Crude oil was down 0.04% on Monday evening to trade at $73.38 per barrel after rising earlier in the day as hurricane Ida shut 95% of US Gulf coast oil output.