NIGERIA’s external reserve is set to hit a 30-month high of
$32 billion by the end of this month.Data from the Central
Bank of Nigeria (CBN) showed that the external reserve rose
to $31.55 billion on August 16, from $30.84 billion on July
31, representing increase of $710 million in 16 days. This
trend is expected to persist in the second half of August
driving up the reserve to the $32 billion mark.
The external reserve had been below $32 billion since
February 2015, 30 months ago, from where it declined
steadily to $23.89 billion on October 19, 2016.
Financial Vanguard analysis revealed that from October 19,
2016, the reserve commenced a bumpy but steady upward
trend, rising by $7.66 billion or 32 per cent to $31.55 billion
on August 16 this year. Also the reserve has risen by $4.56
billion or 17 per cent since the beginning of 2017.
The Central Bank of Nigeria, CBN, headquaters, Abuja
The steady upward trend in the reserve especially since July
7, 2017 was buoyed by improved foreign exchange inflow
occasioned by positive developments in crude oil price
since late last year, dollar inflow from foreign portfolio
investors facilitated by the Investors and Exporters (I&E)
window introduced in April this year, as well as reduction in
dollar sale through CBN’s forex intervention.
Financial Vanguard investigations also revealed that about
$5 billion has been attracted through the I&E window
since inception. According to the CBN, $4 billion has been
traded in the window as at Thursday, August 10, 2017 while
data from Financial Market Dealers Quote (FMDQ) showed
that about $1 billion was traded in the window from Friday
August 11 to last week Friday, August 18. Further analysis
revealed that $925.38 million was traded in the window
from Monday to Friday last week.
Naira appreciates to N359.98 in NAFEX
Reflecting the improved dollar supply, the naira last week
maintained its upward trend against the dollar in the I&E
window, appreciating by N4.8.
According to the FMDQ, the indicative exchange rate for
the window, known as Nigeria Autonomous Foreign
Exchange (NAFEX), dropped to N359.98 per dollar last
week Friday, from N364.78 per dollar the previous week.
This translates to N4.8 appreciation for the naira. Thus the
naira has appreciated by N7.08 for three consecutive weeks
in the window.
However, the naira depreciated by N3 in the parallel
market, as the exchange rate for the market rose to N370
per dollar last week from N367 per dollar the previous
week, owing to increased demand for dollars in the market.
On the other hand the CBN sustained its intervention in the
foreign exchange market by injecting $364 million into the
interbank foreign exchange market. “The Retail Secondary
Market Intervention Sales (SMIS) received the largest
allocation of $264.19 million. The CBN also offered the sum
of $100 million to authorised dealers in the wholesale
window”, said Isaac Okororafor, Acting Director, Corporate
Communications Department, CBN.
In addition to this, the CBN, in a bid to improve foreign
exchange availability in the forex market and ameliorate
challenges encountered by critical stakeholders, said it will
now sell dollars to accommodate payment for port charges
to the Nigerian Ports Authority (NPA) and other agencies by
oil marketing companies.
A circular signed by the Director, Trade and Exchange
Department, Wuritka Dauda Gotring, directed authorized
dealers to accept the request for the payments of port
charges from oil marketing companies and forward same to
the CBN Forex window.
DMO to issue N135bn FGN bond
This week the Debt Management Office (DMO) will issue
N135 billion bond while cost of funds is expected to
stabilize in the interbank money market.
According to the DMO, the bond offer comprises: 5-year,
14.50 per cent FGN JUL 2021 worth N35 billion, 10-year,
16.2884 per cent FGN MAR 2027 worth N50 billion and 20-
year, 16.2499 per cent FGN APR 2037 worth N50 billion.
Analysts were however optimistic that the inflow will have
little impact on the level of liquidity and cost of funds in the
interbank money market.
This optimism was hinged on expected inflow of N88.99
billion from payment of matured treasury bills (T-bills) this
Thursday, and the meeting of the Federal Accounts
Allocation Committee (FAAC) which usually results
to release of the monthly statutory allocation to the three
tiers of government. The N652.23 billion released last
month as statutory allocation to the three tiers of
government helped in boosting market liquidity and taming
cost of funds volatility.
According to analysts at Cowry Assets Management Plc, a
Lagos based investment firm, “This week, we expect
maturities via secondary market worth N14.65 billion viz:
167-day bills worth N7.976 billion and 168-day bills worth
N6.674 billion. We expect further financial system liquidity
ease and stability in interbank rates.”
Similarly, analysts at Vetiva Capital Management Limited,
stated: “We expect the Fixed Income market to open the
week tepid as pressured liquidity continues to constrain
demand. However, we foresee improvement in sentiment
towards week close, supported by the expected OMO
maturity on Thursday.”
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