We’re back with your favourite Market Roundup for Week 19! Here’s everything you need to know about key market events for the previous week, starting with how Nigeria uses FOREX!

FOREX Use in Nigeria Decreased 65% to $ 4.98 Billion in the First Quarter of 2021

Central Bank of Nigeria data reveals that Nigeria used $ 4.98 billion to import goods and services into the country in the first quarter of 2021. This compared to the $ 14.3 billion used in the country in the first quarter of 2020, a decrease of 65%. Nigeria is going through a currency crisis. Lack of foreign exchange inflows, pent-up demand for foreign currency, and currency controls lowered the exchange rate in the official I&E counter and on the black market.

The use of forex in Nigeria is divided into visible and invisible imports, the first being the import of physical goods and the second, services. A breakdown of the figure reveals that the visible imports were $ 2.8 billion compared to $ 3.4 billion for the corresponding period of 2020. Visible imports include imports for the industrial sector, food products, manufactured products, agricultural products, etc. Share of imports. However, the amount used for invisible imports decreased to $ 2.1 billion in the first quarter of 2021, from $ 10.97 billion in the corresponding quarter. Imports from the financial services sector generally absorbed the bulk of the invisible imports, amounting to 94%. In 2020, the country used $ 10.5 billion for imports of financial services, up from $ 1.7 billion in the first quarter of 2021, down 83% year-on-year.

The decline in the level of foreign exchange use this year highlights the difficulty that local companies currently face in accessing forex. To meet the demand for foreign exchange, most private companies resort to the black market where the exchange rate operates at a lower rate than the formal market. Unintentionally pent-up demand creates a thriving market for BDC and parallels market operators who go so far as to attract foreign currency from companies that are already importing foreign currencies into the country. Nigeria currently operates several exchange rate regimes, but as of this year, it relies on the official NAFEX exchange rate to determine the prevailing exchange rate.

Nigeria’s Inflation Rate Drops to 18.12% in April 2021

Nigeria’s inflation rate reached 18.12% in April 2021, marking the first drop in headline inflation in nearly 20 months. This was included in the recent National Bureau of Statistics (NBS) report on the Consumer Price Index. This represents a 0.05% decrease from the 18.17% recorded in March 2021.

On a monthly basis, inflation has decreased by 0.59% from 1.56% recorded in March 2021 to 0.97%. The urban inflation rate decreased from 18.76% in March 2021 to 16.68%, while the rural inflation rate stabilized at 17.57%. Down from 17.6% recorded in the previous month. This means that Nigeria recorded its first drop in headline inflation since the land border closure in 2019. This may indicate that inflation peaked in March and maybe declining.

The Exchange Rate Gainer Listed in the NAFEX Counter

The exchange rate between the naira and the US dollar closed at ₦411.5 against the dollar at the official counter of importers and exporters. The naira rose against the dollar, closing at N411.5 / $ 1 on Monday, which represented a 17 kobo increase from the N411.67 recorded on Friday, May 14, 2021. However, the price maintained stability in the US. Parallel market. The price of the naira for the dollar closed at ₦484, the same price as on Friday last week, while the dollar supply fell by 45.2 percent to $ 111.53 million. In addition, Nigeria’s external reserves decreased by $ 74.02 million on Friday, May 14, 2021, to $ 34.51 billion. Additionally, the N 425.9 per dollar exchange rate was the highest recorded during daily transactions before settling at N $ 1 / 411.5. However, it sold as low as 395 N / $ 1 during intraday trading, which is the same as the price recorded on Friday

External Reserve

Nigeria’s external reserves decreased to $ 74.02 million on Friday, May 14, 2021, to $ 34.51 billion. The country’s foreign reserves decreased from $34.58 billion recorded on Tuesday, May 11, 2021, to $ 34.51 billion on Friday, a decline of 0.21%. Nigeria’s foreign reserves have decreased by $ 749.03 million from April 16, 2021, until now, while the country’s reserves have decreased since the beginning of the year by $ 867.98 million. The continued decline in foreign reserves comes despite the recent rise in crude oil prices and the bank’s ongoing efforts to increase dollar inflows by encouraging transfers of dollars into the country.

All Currency Rates, Fixings, Prices, and Indices were obtained as of Value date, Tuesday, May 18, 2021.

Stocks, Future Rise; Dollar Near Four-Month Low: Market Wrap

Asian stocks and US futures rose on Tuesday as investors focused on the pace of growth as economies reopened against the resumption of virus cases in the region. The dollar fell. Taiwan outperformed, jumping to 5.2%, as the Financial Stability Fund said it was monitoring stocks after its worst loss in more than a year, and data showed that foreign investors continued to buy while selling. Japan and Hong Kong accelerated gains on a gauge in stocks in the region. Previously, stocks in technology and telecommunications services drove US stocks lower with increased volatility. Futures rose in Europe. Treasury bills remained stable after being drawn down. The Bloomberg Dollar gauge is down near a four-month low it hit last week.

Oil rose slightly near a two-year high amid optimism about a recovery in demand in regions such as the United States, even as the Coronavirus spreads in parts of the world. This week, investors will analyze the minutes of the last meeting of the Federal Open Market Committee for any discussion of accelerating price pressures and indicators on a timeline to reduce asset purchases. Fed Vice Chairman Richard Clarida said in a webinar that the weaker-than-expected salary report for April shows that we “haven’t made much progress” on targets. The central bank presented employment and inflation as the limits to begin cutting massive monthly bond purchases.

All Currency Rates, Fixings, Prices, and Indices were obtained as of Value date, Monday, May 18, 2021.

BDC Rates: (Bureau De Change)This refers to the FX rates obtainable for valid transactions at the Parallel market i.e Black Market or local Licensed BDC operators in Nigeria

I & E Rates: The Investors’ & Exporters’ FX Window (I&E FX Window) is the market trading segment for Investors, Exporters, and End-users that allows for FX trades to be made at exchange rates determined based on prevailing market circumstances, thus ensuring efficient and effective price discovery in the Nigerian FX market. The I&E FX Window was established by the Central Bank of Nigeria (CBN) via a circular dated April 21, 2017

NAFEX – (The Nigerian Autonomous Foreign Exchange Fixing) is the reference rate for Spot FX operations in the Autonomous FX Market which comprises recognized FX trading segments, including but not limited to the Inter-bank market, the I&E FX Window and any such approved and recognized trading segment as may be defined from time to time. NAFEX is used in the daily valuation and settlement of the OTC FX Futures Contracts.

CBN Official Rate: This is the official rate at which direct transactions can be carried out with the CBN. This rate can only be obtained when direct deals or FX trades are done directly with the CBN

Sources: FMDQ, Flutterwave Treasury Team, Abokifx, Proshare,.Bloomberg.com, Reuters, Nairametrics, FMDQ, Guardian

Disclaimer- This report is based on information obtained from various sources believed to be reliable and no representation is made that it is accurate or complete. Therefore, all rates shown here are mark-to-market rates being published for guidance purposes only. Reasonable care has been taken in preparing this document. Flutterwave Technology Solutions Ltd shall not accept responsibility or liability for errors of fact or any opinion expressed herein. This document is for information purposes and private circulation only and may not be reproduced, distributed, or published by any recipient for any purpose without the prior written consent of Flutterwave Technology Solutions Ltd. 

Published by Ifeoluwa Oyeleke

Senior Treasury Analyst