Foreign reserves appreciate to $39.62bn
By Kayode Tokede
The Central Bank of Nigeria (CBN) has said the country’s foreign exchange reserves appreciated to $39.62billion as at October 14, 2021.
The recent increase in the reserve position, which has continued since 25th of August, is in line with recent reports suggesting that Nigeria’s foreign reserve position could grow as high as $40 billion by the end of September 2021.
The reserve is further boosted by the receipt of $3.35 billion special drawing rights (SDR) allocation from the International Monetary Fund (IMF) which the Federal Government hopes to use to reduce budget deficit.
The reserve gained a record $2.76 billion in the month of September 2021, while the recent gain puts the year-to-date gain at $2.81 billion. It is also worth noting that Nigeria’s reserve has gained over $1.39 billion in just 4 days into October 2021.
Meanwhile, the naira depreciated by 0.2per cent w/w to N415.07/$ at the I&E window (IEW) but appreciated by 0.2 per cent week-on-week (w/w) to N572.00 against the dollar at the parallel market.
At the Investors & Exporters Foreign Exchange window (I& E FX), total turnover (as of 14th October 2021) declined by 19.8per cent WTD to $786.40 million, with trades consummated within the N404.00 – 447.60 against the dollar band.
According to analysts at Cordros capital, “We expect improved liquidity in the I & E FX over the medium term, given our expectation of (1) increased oil receipts in line with the rise in crude oil prices and (2) inflows from FCY borrowings ($6.18 billion) and IMF SDR ($3.50 billion).
“Accordingly, we expect the naira to remain relatively range-bound (N410.00/USD – N415.00/$) at the I & E FX.”
They explained further that “the overnight (OVN) rate expanded by 550bps w/w to 20 per cent following debits for CRR, net NTB issuances (N65.57 billion), CBN’s weekly OMO (N50.00 billion) and FX auctions amid inflow from OMO maturities (N110.00 billion).
“Meanwhile, the Treasury bills secondary market ended the week on a bullish note following (1) the improved system liquidity in the early parts of the week and (2) market participants’ filling unmet demand from Wednesday’s NTB PMA at the secondary market.
“Consequently, the average yield across all instruments declined by 5bps to 5.8per cent.
“Across the market segments, the average yield remained unchanged at 6.5% at the OMO segment but contracted by 7bps to 5.2per cent at the NTB segment.
“At the NTB PMA, the CBN offered N121.66 billion for sale and eventually allotted N187.23 billion – N4.22 billion of the 91D, NGN6.95 billion of the 182D and N176.06 billion of the 364D bills with stop rates of 2.50% (unchanged), 3.50% (unchanged), and 7.25per cent (previously 7.50per cent), respectively. Demand at this auction was very strong, with a subscription level of N493.03 billion (Bid-offer ratio: 4.1x vs previous auction: 1.6x).
“The Treasury bonds secondary market closed the week with mixed sentiments, albeit with a bullish tilt, as investors (1) remained on the sidelines awaiting further clarity on the direction of yields and (2) refocused their attention to corporate instruments. Consequently, the average yield pared by 1bp to 11.3per cent.
“Across the benchmark curve, the average yield expanded at the short (+2bps) and long (+2bps) ends as investors sold off the JAN-2026 (+20bps) and MAR-2035 (+12bps) bonds, respectively. However, it declined at the mid (-10bps) segment following demand for the MAR-2027 (-31bps) bond.”
