CBN Has Enough Forex to Meet Market Demands – Analysts

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CEM REPORT | Analysts at Codros Securities has ascertained players in the market that the Central Bank of Nigeria (CBN) has enough foreign exchange (forex) to meet market demand.

According to the report on overview of market, with proceeds from Eurobond issue and the International Monetary Fund (IMF) Special Drawing Rights (SDR), the apex bank is not short of forex.

The analysts argued that the current low level of crude oil production has weakened foreign reserves accretion; a development which they said necessitated the implementation of policies that would encourage the inflow of foreign portfolio investments.

According to the report, “the CBN has enough supply to support the forex market over the short term, given inflows from the recently issued Eurobond and the IMF’s SDR.

“However, foreign inflows are paramount for sustained FX liquidity over the medium term, in line with our expectation that accretion to the reserves will be weak given that crude oil production levels remain pretty low”, said the report.

The report called for additional measures to attract Foreign Portfolio Investors (FPIs), insisting that: “Thus, FPIs which have historically supported supply levels will be needed to sustain forex

liquidity levels. Hence, we think (1) further adjustments in the NGN/USD peg closer to its fair value and (2) flexibility in the exchange rate would significantly attract foreign inflows back to the market.”

As of last week, Nigeria’s foreign reserves were $40.7 billion almost at the $42 billion thresholds set by the apex bank for mid-2022.

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Last year, Nigeria was able to raise $4 billion through Eurobonds, which financial analysts described as a reflection of investors’ confidence in the economy.

The Debt Management Office (DMO) had in a statement explained that the Order Book peaked at $12.2 billion, which enabled the Federal Government of Nigeria (FGN) to raise $1 billion more than the $3 billion it initially announced.

The Eurobonds were issued in three tranches, details, namely seven years –,$1.25 billion at 6.125 per cent per annum; 12 years -$1.5 billion at 7.375 per cent per annum as well as 30 years -$1.25 billion at 8.25 per annum.

Also last year, the board of governors of the International Monetary Fund (IMF) had approved the allocation of $3.35 billion to Nigeria as part of a historic general allocation of Special Drawing Rights (SDRs) of the International Multilateral Institution.

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