CBN reduces weekly forex sale by 25% as Nigeria’s Eurobonds appreciate

THE Central Bank of Nigeria (CBN) last week reduced its weekly foreign exchange sale to banks by 25 percent, even as prices of Nigeria’s Eurobond rose amid renewed investor’s interest.

Previously the CBN have been selling $7.5 million dollars per week to banks through the interbank foreign exchange market. Financial Vanguard investigations however reveal that the apex bank sold $6 million to banks last week, indicating 25 percent reduction. The dollars were sold at an average interest rate of N304 per dollar.

The reduction notwithstanding, the Naira appreciated against the dollar at the interbank market as the interbank foreign exchange rate dropped by 0.12 percent to N314.625 per dollar.

Governor, Central Bank of Nigeria (CBN), Mr Godwin Emefiele
Foreign reserves

The Naira however depreciated against the dollar to N493/ USD at the parallel market. Analysts at Cowry Assets, a Lagos based investment firm, however predicted stability of the Naira this week, following steady rise in the nation’s foreign reserves.

According to the CBN the foreign reserve rose further by $373 million to $26.22 billion on Wednesday January 5th, from $25.84 billion on Thursday December 30, 2016.

‘’This current week, we expect stability of the Naira exchange rate as the increasing reserve spur confidence on the ability of the Central Bank of Nigeria (CBN) to intervene more aggressively in the official market window”, said Cowry Asset analysts.

Eurobonds appreciate

Meanwhile, Nigeria’s Eurobond listed on the London Stock Exchange enjoyed price appreciation following increased demand by investors. According to data of closing prices and yields of Eurobond posted by the Debt Management Office (DMO), the 10 year, 6.75% January 28, 2021 bond, gained $2.03, while its yield fell to 5.67 percent; the 5 year, 5.13% July 12, 2018 gained $0.43 while its yield fell to 3.18 percent; the10 year, 6.38% July 12, 2023 bond gained $2.62 while its yield fell to 6.36 percent.

However, prices of FGN bonds traded on the Over The Counter, OTC, secondary market depreciated while yields rose due to drop in market liquidity triggered by treasury bills sale by the CBN.

Reacting to the developments analysts at Meristem Securities Limited, aanother Lagos based investment firm, stated in the company’s investment outlook for this week that ‘’activities in the Treasury bond space were characterized by bearish sentiments.

Bargain hunting activities

The average bond yield advanced by 0.31 percent at the close of the week to 16.67%.

‘’In the coming week, we expect pockets of bargain hunting activities on bonds currently trading at low prices.”

Meanwhile, the DMO on Friday announced its intention to raise about N430 billion through bonds sale in the first quarter of this year.

According to the bond issuance programme for the first quarter of 2017, Q1’17, posted on its website on Friday, the agency sell between N110 billion and N140 billion bonds maturing in 2021 and 85 billion, as well as N105 billion bonds in 2026. It will also sell between N45 billion and N 55 billion in bonds maturing in 2027 and between N100 billion and N130 billion of bonds maturing in 2036.