WED 15 SEPT, 2021-theGBJournal- Since the last Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) in July, the Investors and Exporters Window (IEW) exchange rate has depreciated marginally by 0.3% to NGN412.75/USD as of 13th September.
At the same time, the parallel market exchange rate has depreciated by 9.3%, with a YTD depreciation of 15.6%. Recall that the CBN Governor announced the discontinuation of the sale of FX to the BDCs at the July meeting, given their rent-seeking behaviour. Since then, the parallel market exchange rate has depreciated to NGN557.00/USD as of the time of writing from NGN505.00/USD on 27th July (when the announcement was made).
The gross FX reserve has also increased by USD1.53 billion (+4.6%) since the last policy meeting to USD34.86 billion as of 10th September 2021.
The increase is tied to the IMF’s disbursement of Special Drawings Rights (SDR) worth USD3.35 billion to the country. However, the gross FX reserve is yet to capture the total amount, given that it is calculated based on a 30-day moving average.
Accordingly, we expect the gross FX reserve to sit at USD36.52 billion by 30th September, when we expect the SDR to have fully reflected in the FX reserve. In addition, we expect the Eurobond issuance (USD3.00 billion) in October to further support the FX reserve accretion over the short-to-medium term. The currency is also expected to remain relatively range-bound (NGN410.00/USD – NGN415.00/USD) at the IEW.
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