Naira, External Reserves Plunge as Eurobond Matures
Suggesting daily strong volatility, the Nigerian naira depreciated by 3.5% to N768.44 at the Investors’ and Exporters’ foreign exchange (FX) market on Tuesday after the previous rally.
Data from the Central Bank of Nigeria (CBN) shows that gross external reserves dropped to $34 billion already despite improved earnings from export recorded in June ahead of maturing Eurobond payment.
Next week, Nigeria’s senior unsecured $500 million issued at a coupon rate of 6.375% to support government finances will be due for repayment in the international debt capital market.
A number of Broadstreet analysts said they don’t expect the repayment to trigger immediate issues, though the repayment value in naira term has surged following apex bank’s decision to float the local currency
In the parallel market, the naira remained relatively flat at N775 versus the United States (US) dollar, reflecting the positive impact of the FX market liberalisation. FX stop rates had converged but there is unsettled dust in foreign currency supply.
A slew of forex traders said they expect the re-introduction of the “willing buyer, willing seller” model at the official window to influence the exchange rate direction in 2023. More so, investment banking experts believe the apex bank FX reform would not yield desired results until the authority clears forex backlog owed to foreign investors.
“… while the CBN’s abolishment of its multiple FX windows is positive in boosting foreign investors’ confidence, we think they will adopt a wait-and-see approach, for now, looking for signals on the CBN’s plans to start clearing the FX backlogs and boosting FX supply to support the market in the near term”, Cordros Capital stated.
