CBN expects foreign reserves’ dip to $29.9bn by year end

CBN, Currency in Circulation, DMBs, Naira

Amidst continued pressures on the external sector of the economy, the Central Bank of Nigeria (CBN) has projected a major fall in the country’s foreign reserves to $29.9 billion by the end of 2020 citing decline in oil prices and the impact of the Coronavirus (COVID-19) pandemic. In a report titled, ‘Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2020/2021’, the apex bank stated: “Sequel to the COVID-19 pandemic, the viability of the external sector in 2020 is expected to deteriorate, given the present worsening current account…

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Forex: CBN sets new rules to prevent quick depletion reserves

CBN PMC MPR

Amid free-falling foreign exchange reserves in it’s vault, the central Bank of Nigeria (CBN) has banned transfer of foreign exchange (forex) from one customer to another. CBN emphasised that based on the new rules, forex cash lodgements into domiciliary accounts can only be done by the account owners henceforth. An internal memo available to the media explains that the new guidelines are necessary to review the utilisation of inflows into customers domiciliary accounts. The circular states: “Forex inflows cannot be credited to customers until the legitimacy of funds is established.…

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Naira continues to nosedive despite CBN’s $51.8m intervention; exchanges for N440/$

CBN resumed dollar to BDC

Four days after the Central Bank of Nigeria (CBN) had resumed partial sales of dollar to Bureau De Change (BDC) operators in the country, the local currency, naira, continues to trade on the low side as it exchanged for N440 to a dollar in the parallel market on Thursday. The naira had last week dropped from N480/$ to N420/$, following CBN’s announcement to resume forex sales to the BDCs. Market observers noted that the appreciation recorded by naira was due to release of hoarded forex by market speculators in the…

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Analysts to CBN: Fund BDCs To Reduce Exchange Rate Gap

naira

The wide gap in the naira/dollar exchange rates in the different segments of the foreign exchange market is likely to be reduced when the Central Bank of Nigeria (CBN) resumes forex sales to Bureaux De Change (BDC), analysts at Cowry Asset Management Limited have said. In the wake of measures introduced by the Federal Government to contain the spread of the coronavirus (Covid-19) pandemic, which included the banning of domestic and international flights, the CBN had on March 26, suspended the sale of forex to BDCs. Analysts said the BDCs’…

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FMDQ Post N18.72tn Turnover In July

FMDG, FX, Forex

Turnover in the Fixed Income and Currency (FIC) markets for the month ended July 30, 2020 was N18.72 trillion, indicating a month-on-month (MoM) increase of 13.66 per cent (N2.25 trillion) from the turnover recorded in June 2020 (16.47 trillion). This represents a year-onyear (YoY) decrease of 14.43 per cent (N2.36 trillion) from the turnover recorded in July 2019 (N16.36 trillion). As at July 29, 2020, YTD turnover was N136.00 trillion, representing a YoY increase of 0.30 per cent (N0.41 trillion) on the YTD turnover of N135.58 trillion recorded in July…

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The Changing Landscape for FX Sales

FBNQuest, FX

By FBNQuest Our chart covers Q1 2020, when fx was available and the CBN was supplying its various windows with sales above US$13bn to authorized dealers. It was most active at the investors’ and exporters’ window (I&E, or NAFEX.). It has not supplied this market since late March, and weekly inflows have slumped to about US$100m from more than US$1bn. The CBN was the largest seller in Q1 at the I&E as the maturities of its open market operations (OMO) bills gathered momentum and foreign portfolio investors (FPIs) departed in…

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Cracks In The Bond Market?

bond market

By Coronation Research Analysts From mid-March through to the beginning of this month, the Federal Government of Nigeria (FGN) bond market was a one-way bet, with yields tightening and prices moving up steadily. Two weeks ago the market cracked, with a brief sell-off, which was a reminder that prices can go down. However, it seems that institutional liquidity is set to increase, and more bond-buying may emerge in the weeks and months ahead. This is dangerous, in our view, and stores up trouble for the future. As we argue in…

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Naira: The Journey towards Exchange Rate Convergence

CBN resumed dollar to BDC

By Vetiva Analysts In line with how the COVID-19 pandemic is spurring a new normal in business and economy, the Central Bank of Nigeria (CBN) is gradually embracing agelong reforms in the country’s foreign exchange (FX) market. For many years, international financial institutions, such as the International Monetary Fund (IMF), have expressed displeasure with the country’s FX restrictions and multiple currency practices (MCPs). One of such MCPs is the gap between the official exchange rate and the other unofficial rates, that exceeded the 2% divergence guideline. The large gap between…

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Evolution Not Revolution in FX Thinking

Evolution Not Revolution in FX Thinking

By FBNQuest Analysts Our simple chart is almost symmetrical and neatly conveys the recurring challenges at the heart of exchange-rate policy. Between June 2017 and February 2020 fx was freely available. The differential between the official/interbank rate and that at the bureaux de change was constant. Up to May 2017 and since March this year, fx has been in short supply and the spread considerably wider. The turbulence either side of the period of calm reflects pressure on the balance-of-payments and reserves. As the sequence of events has repeated itself…

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