• Lose $1.6b post-flexible policy
• $1b Eurobond to hold mid December amid poor sovereign rating
Nigeria’s foreign exchange reserves have plummeted to a new low of $24.88 billion, indicating dwindling confidence in the economy, despite reassurances by authorities.
In the last one week, it lost $230 million, understandably due to series of interventions by the Central Bank of Nigeria (CBN), as post recession announcement pressure continued.
The previous week, the reserves lost about $123 million, attributed to interventions in the interbank market by the regulator, and aimed at supporting the local currency.
This is in contrast with about $93 million the reserves lost in three weeks, also reflecting reactions over the flurry of negative records released recently by the Nigerian Bureau of Statistics.
Since affirmation of the country’s slip into recession, last experienced more than 25 years ago, the reserves have lost about $540 million, as speculations and panic for store of value in dollar heightened.
CBN has emerged the major player in the interbank market since the inception of the new regime, except when, recently, foreign investors staked about $270 million, while others remained cautious.
The reserves have also lost about $1.6 billion since the inauguration of the flexible exchange rate, even as the apex bank steps up modification of its rules, to attract foreign investors, including those associated with investments in government securities.
Expected convergence of the interbank and parallel markets exchange rates remain unattainable at the moment, as the liquidity crisis in the currency market persists, pushing both rates apart. At the parallel market, the local unit ended last week at N425/$.
Although, no particular date has been announced, the planned $1 billion Eurobonds by the government is being mooted to hold between November and mid-December.
The head of the nation’s debt broker, Abraham Nwankwo, has already affirmed that all borrowings would be used for capital projects, while ensuring that local partners to the deal, like banks, are well involved.
A new twist, however, has emerged, with sudden downgrade of the country’s credit rating, even as it battles the stigma of recession within the investment community.
The development shows two fundamentals about the feasibility of the debt deal: general acceptability of the bond among the international community, and cost.