The Nigerian Naira price to dollar depreciates, trading past N400 to dollar at the forward market after Nigeria recorded its first case of coronavirus.
Naira is priced at N413.55 to the dollar which is higher and more expensive compared with the N399.73 that it was trading last two weeks.
Wondering what is a forward market? Forward Market is an over-the-counter marketplace that sets the price of a financial instrument or asset for future delivery. Forward markets can be used in trading various instruments, mostly at the foreign exchange market.
Meanwhile, from a bloomberg survey, the decrease in foreign reserves and lower oil prices might force the Central Bank of Nigeria (CBN) to devalue the naira which is seen as one of the world’s most stable currencies in Africa.
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More analysts from the bloomberg survey report claims that naira will depreciate by 10 to 20 per cent in the parallel market by 2021. Meanwhile, the falling price of crude oil is increasing and the foreign exchange reserves persists.
Moreso, according to the Bloomberg survey covering investors and analysts. There are 10 reponses out of the 19 responses received who predicts the value of Naira to drop in 2021.
Also four persons among the participants of the survey claims that naira is more than 10 per cent overvalued against the dollar. Then the two other respondents said it will be 20 per cent stronger.
Since its devaluation in 2017, Nigerian Naira trades around 360 to 365 per dollar. CBN says the exchange rate of the currency is determined by the market. Meanwhile Naira is less volatile than other oil currencies, such as the Russian ruble etc.
“The average price range of Nigerian Naira to Bitcoin has increased on Remitano from 360 or 365.50.”
Since June 2019, Nigeria’s reserves have decreased by 17 per cent to $37.4 billion, this is the lowest price in more than two years. Also, the Largest oil producer in Africa got a profit drop of $350 million.
See Also: Central Bank Of Nigeria Stipulates Fitness Standards For Fit And Unfit Banknotes Circulation.
The Central Bank of Nigeria, CBN has created several policies aimed at improving the value of Naira. Some of these policies includes:
Restricting importers’ access to dollars.
Increasing the sale of high-yielding debt to attract inflows from portfolio investors.
Supporting the border closure policy which was initiated by the government stop smuggling.
The participants from the bloomberg survey includes money managers, analysts and economists based in Nigeria and abroad. These anonymous members wishes to remain unknown.
But then, considering the response from three of the respondents, reserves would have to hit $30 billion before the CBN considers allowing the currency fall. This is in line with the assurance from Governor Godwin Emefiele of CBN to investors last year concerning the naira devaluation.
Speaking on the survey result released by bloomerbg, CBN Spokesman Isaac Okarafor said that in 2016, Nigeria had reserves as low as $23 billion and still survived.
“We have proved them wrong before and we will do it again,” he told Bloomberg”.
Moreover, the spread of the coronavirus might be one reason that Bitcoin has fallen from its $10,000 plus high over the last few weeks. Many more offices might start to work from home.
Some exchanges like Remitano has recorded an insignificant price increase on Naira to Bitcoin market to dollar value. Some top cryptocurrency companies like Coinbase said it is ready to work against all odds to prevent the coronavirus issue from affecting its service.
The company says it has set up a plan running in has three-phases incase the coronavirus reaches the office. The first phase will be to clean the offices and restrict visitors.
In the second phase, the offices will close and stop taking visitors and serving food. If it fails then the third phase will follow up. On the third phase, the workers will be working remotely and the offices will be locked down.
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