FRI, NOV 03 2023-theGBJournal| The Central Bank of Nigeria (CBN) has reportedly made significant progress in fulfilling a substantial portion of its outstanding matured FX forwards, reaching approximately 75% to 80% completion and potentially achieving full settlement in select specific banks.
This initiative commenced on Monday, starting with international banks, and has seen Citibank confirming the clearance of its outstanding matured FX forward.
While it remains uncertain whether the CBN will completely resolve all its matured FX forwards, the Comercio Partners team anticipates a positive market response until conflicting news emerges. Therefore, asset managers and traders should make prudent decisions regarding their portfolios.
Ifeanyi Ubah Investment Research Associate, Comercio Partners explians why the move to retap the Eurobond matters
Uptick in Eurobond:
Anticipate a surge in market confidence, particularly in Nigeria’s securities like the Eurobond. This positive development might trigger an increase in investor interest in these assets, potentially resulting in a rally around the Eurobond.
Strengthening of the Naira:
The news is expected to bolster confidence in the Naira, potentially leading to an appreciation of its value. While the official market saw bids as low as 700/$, settling at 789.75/$ with a turnover of $105 million, there’s an optimistic outlook for the black market, indicating a potentially significant gain for the Naira from its current position at 1160/$.
Banks Stock:
A positive impact on bank equities is anticipated, evidenced by the observed upward trend in major bank stocks this week. This trend suggests increased investor confidence and interest in the banking sector.
Recommended Strategies and Possible Hedge:
Amidst potential market shifts following the CBN’s actions, investors are advised to focus on securities related to the Eurobond and Nigerian banks. Additionally, diversification of investments in international markets is suggested to counteract unforeseen domestic market volatility, particularly regarding currency fluctuations. Considering global uncertainty, strategic attention to the energy sector is highly recommended.
Bottomline:
The reported actions by the CBN are expected to bring about favourable changes in Nigeria’s financial landscape, primarily by strengthening the Naira and fostering confidence in the securities market. Portfolio Managers are urged to analyze the implications and make appropriate adjustments to their portfolios, leveraging potential opportunities while managing associated risks.
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