CBN Moves to Clear Foreign Investors FX Backlogs
Indications have emerged the Central Bank of Nigeria (CBN) has moved to clear foreign exchange backlogs, analysts at Cordros Capital hinted about the development in a note ahead of the apex bank monetary policy committee meeting.
Dollar inflow into Nigeria appears to have improved in the latter part of the financial year 2021. The accretion is noted to be driven by stable global prices of oil, and improved crude output that hits 1.80 million barrels per day in October.
Similarly, the CBN has received inflow from Eurobond and the international monetary fund special drawing rights, which pushed external reserves near $42 billion.
For the last time in 2021, the monetary policy committee will be meeting on Monday and Tuesday to review macroeconomic progress in light of developments around the world.
Some analysts expect the committee to adjust benchmark policy rates, though some think policy makers would adopt the usual ‘wait-and-see’ strategy as Nigerian economic growth is yet to fully come out of the woods.
In the foreign exchange market, analysts at Cordros capital limited believe that parallel market rate has embarked on a road to normalcy. Naira has gained strongly against the United States at the unofficial market.
Analysts said since the last policy meeting in September, the exchange rate has remained relatively range bound at NGN410.00–NGN415.00 to a dollar at the Investors and Exporters foreign exchange window.
However, the exchange rate touched the NGN420.00 per dollar level on the 14th and 15th October when it traded at NGN422.07 apiece, analysts said.
Cordros Capital said notwithstanding, the CBN began selling USD25.00 million to the foreign portfolios investors (FPIs) at the spot and forward market at the rate of NGN444.00 and NGN453.00 per dollar respectively.
The preceding suggests the CBN has commenced clearing the FX demand backlogs given the substantial inflows from IMF’s SDR and the Eurobond issuance, according to Cordros Capital analysts note.
Recalled that the apex bank had devalued the local currency to N430 from N380 a dollar at the interbank foreign exchange market in the fourth quarter of the year followings moves to stem naira from running out of steams.
The investment firm hinted that its survey result indicates that the Naira appreciated against the US Dollar at the parallel market.
Precisely, the Naira appreciated by 6.8% to NGN535.00 per dollar compared with NGN571.50 at the last policy meeting in September.
“For us, this development is due to reduced activities from currency speculators, leading to offloading of the greenback given expectations that the CBN will improve FX intervention”.
Over the short term, analysts said they are expecting the rally in oil prices to support the gross FX reserves in addition to the one-off inflows from the IMF’s SDR and Eurobond facility.
The nation’s gross external reserves stand at $41.4 billion this week.
“We expect the accretion to the gross foreign exchange reserves to comfort the Committee to maintain its current stance as the CBN’s arsenal to defend the Naira is in a strong position”, analysts at Cordros Capital stated. #CBN Moves to Clear Foreign Investors FX Backlogs
Inflexible Naira Pricing, FX Backlog Subdue Capital Inflow -Analysts
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