A herd of foreign investors have continued to express fear over the likelihood of another depreciation of the naira despite central bank’s measures that have helped steady the exchange rate.
The naira has remained stable in the inter-bank market despite a steady decline in Nigeria’s Foreign Exchange (FX) reserves. The central bank’s determination to keep the naira stable has come at a cost as crucial foreign currency reserves edge closer to $29 billion.
Nigeria’s average government bond yields fell 81 basis points to 14.47 per cent on April 1, the lowest since December 12.
Dealers said most of the demand came from domestic investors, who don’t have to take the naira’s exchange rate into account, according to head of research at London-based Ashmore Group Plc, which manages $64 billion of emerging market debt, JanDehn.
Bloomberg quoted a money-manager who helps oversee $12 billion of developing-nation debt at Aberdeen, Viktor Szabo, as having said while the central bank’s measures have helped steady the exchange rate, they have reduced liquidity and left the naira overvalued, his firm has not resumed buying naira debt.
“The currency hasn’t adjusted sufficiently,” Szabo said. “It’s the turn of the central bank to act. If the move is sufficient, we’re probably talking to above 220 a dollar. We’d be inclined to get involved with the local bonds”.
The naira at the interbank market closed flat week on week (W-o-W) at N199.10/US$1 (same as that of the previous week), having opened last week at N199.11/US$1 and was sold at N197.00/US$1 by CBN. The pressure on the naira moderated penultimate week as the economy stabilized following the announcement of the presidential elections results evident in the one kobo appreciation of the naira to N199.10/US$1 on Tuesday. The sale of dollars by the Central Bank to defend the naira has led to the decline of the foreign exchange reserves to US$29.8billion bringing year to date (YTD) and W-o-W losses to 13.6 per cent and 0.2 percent respectively.
Source : Tribune