Experts allay fear of naira devaluation in 2020
• Cite proposed $3.5b Eurobond, $36billion reserves as buffer
Experts in the financial system have allayed fears of possible devaluation of the Naira this year, considering various strategies the Central Bank of Nigeria (CBN), has adopted to ensure the nation is well-positioned to shore up funds.
The experts, who spoke at the 2020 Coronation Breakfast session, themed: “Re-risking the Nigerian Financial System,” in Lagos, yesterday, argued that the proposed $3.5billion Eurobond to be issued by the CBN between now and early second quarter, in addition to the $36billion already in the reserves put the country on a good revenue standpoint at over $39billion.
Specifically, the Head, Trading and FI, Coronation Merchant Bank, Iyabosa Sorae, said aside the bond and money in reserves, the CBN can also take bilateral loans from international lenders like the World Bank, and the International Monetary Fund (IMF).
She said: “If you look at the fact that we can also decide to take bilateral loans from the likes of World Bank and the IMF, and if we are taking loans in the tranches of like one billion, two billion, it then means the foreign exchange reserves at the end of the day may comfortably be sitting at $40billion.
“For the oil price, which is at $54; already below our benchmark is of course a risk, but with every risk, you have to come up with mitigant, and when you have a portfolio or when we decompose our FX reserves, we begin to see components that make up that reserve accretion from oil.
“It is based on those statistics that we are saying for this year, we think the CBN is on the right foot. Now you have loans, you have Eurobonds, if I find out that there is a problem in one source, it means to plug that shortfall, I have to fall back on the others,” she added.
The Head of Research, Coronation Merchant, Guy Czartoryki, said with the planned Eurobond issuance, in addition to other strategies the CBN has adopted, Nigeria has a good chance of accumulating enough money to shore up its reserve and prevent devaluation in 2020.
He said: “Nigeria is on course to tap the Eurobond market, and this is a great time for us to issue Eurobond. In choosing to issue sovereign Eurobond, Nigeria is taking advantage of an environment of a declining yield, coupled with the fact that it stayed away from the Eurobond market in 2019.”
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