Naira Slumps 5.96%, Nigeria's Eurobond Matures Today

Naira Slumps 5.96%, Nigeria’s Eurobond Matures Today

The Nigerian naira saw significant daily depreciation at the Investors’ and Exporters’ foreign exchange (fx) window, giving up previous gain against the United States (U.S.) dollar amidst foreign currency shortage in the economy.

Relatively undervalued, the local currency is still struggling to find its bearing across the foreign exchange market. The gap between official and parallel market rates has been swinging on both sides as the apex bank watch by the side waiting for convergence.

By consensus, Broadstreet analysts think the liberalisation of the fx market is not enough to bring foreign investors and hot monies into play, at least yet. On year on year, Nigeria’s capital import declined in the first quarter of 2023.

Market expectation however remains positive as International Oil Companies have received permission to sell their foreign currencies earnings to deposit money banks in Nigeria – a move to improved liquidity position at the Investors, Exporters FX window.

Investment bankers and economists maintained a position that the Central Bank of Nigeria will need to clear the FX backlog owed to foreign investors that wanted to upstream foreign currencies offshore, first to boost morale and attract funds into the economy.

Analysts told MarketForces Africa that the move is positive for the Nigerian naira, a signal towards a plan to strengthen the local currency which Bank of America estimated is undervalued, according to its Global Research update. BofA estimated that Naira will claw back to N680 when all the FX dust settles.

On Tuesday, market participants sold US dollars to requisitors at N788.42 as the supply side weakened against the demand levels registered. Data from the FMDQ Exchange over-the-counter FX platform showed that the naira lost 5.96% against the US Dollar, trading at N788.42 from N744.07, beating non-deliverable forward market projection of N785 in a month’s time.

Meanwhile, Nigeria’s senior unsecured 500 million dollars 6.375% Government Bonds with a maturity date of 12 Jul 2023 is expected to be settled.

In the parallel market, the local currency witnessed yet another value decline. The local currency fell 0.08% to N795.7 from N795 per dollar, currency traders said on Tuesday amidst a global crude oil market rally.

Brent crude rose 0.19% to $78.32 per barrel, while West Texas Instrument (WTI) crude gained 0.46% to $73.52 per barrel. Oil futures rose on Tuesday, boosted by expected supply cuts from top oil exporters Saudi Arabia and Russia and an improved energy demand outlook in China amid planned stimulus.

Today, Nigeria’s $500 million Eurobond is expected to be settled. With $34 billion in gross external reserves, the repayment is expected to have minimal economic impacts.  #Naira Slumps 5.96%, Nigeria’s Eurobond Matures Today

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