Oyetunji Abioye with agency report
The Central Bank of Nigeria weakened its
exchange rate peg to N197 against the dollar on the interbank market on
Friday, down from N196.97, Reuters reported quoting foreign exchange dealers.
Traders said the regulator set the new
rate for market closing price on Thursday, making this the 11th
adjustment since the bank introduced tight currency controls in
February.
The CBN has resorted to adjusting the
rate on the local currency since pegging it to the dollar in February
and abolishing two-way naira quotes to help conserve forex reserves.
Traders said the present method of
exchange rate fixing had led to an erosion of the nation’s external
reserves, which stood at $30.13bn as of October 27, down from $30.38bn a
month earlier.
The central bank has resisted calls to
further devalue the naira in the face of a plunge in vital oil revenues.
But the bank has continued to intervene periodically to provide forex
liquidity support for the local currency.
It also sells dollars twice-weekly to
bureau de change operators as part of efforts to support the naira and
narrow the gap between the official and parallel foreign exchange
markets.
Yields on Nigeria’s local currency
denominated bonds are expected to rise this week as offshore investors
and some local investors sell holdings.
“We are anticipating a massive sell off
this week from some offshore investors still holding their positions in
the market,” one dealer said, adding some local pension funds could
follow suit.
JP Morgan is expected to remove Nigerian
bonds from its Emerging Market Government Bond Index by the end of
October, prompting the shift out.
Yields on the benchmark 2024 paper
dropped to 13.49 per cent on Friday from 13.60 per cent the previous
week, but are seen rising above 14 per cent level this week.
“A sell-off either by the remaining
offshore investors in the market or pension funds ahead of the auction
on November 11, would lead to increased yields in the near term,” a
senior treasurer said.
Meanwhile, yields on Kenyan Treasury
bills are likely to dip again next week, while rates on Nigerians paper
were expected to rise as offshore investors sell.
Yields on Kenyan T-bills are likely to
slip this week, with extra shilling liquidity chasing the instruments
and the central bank sending what traders saw as a signal that it would
not accept the high rates seen earlier this month.
Source: Punch
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