The NTB auction this week will shed light on the DMO’s borrowing strategy for the Quarter and confirm its alignment with CBN’s tightening posture or otherwise. The Bond issuance calendar will also help give a sense of the interest rate direction for the rest of the year.
Going forward, a core issue remains the underlying shortage of FX supply, which continues to limit the appreciation in the value of the Naira. Nigeria’s ability to generate FX largely depends on her oil exports, and fluctuations in global oil prices, coupled with declining production levels, have severely reduced the inflow of Dollars into the economy. The key will be for the government to implement policies that enhance FX supply, encourage market confidence, and reduce the demand pressure that has contributed to the Naira’s depreciation. While the sales to BDCs and the RDAS system have provided a temporary reprieve, long-term solutions will likely require more comprehensive economic reforms, including boosting non-oil exports, attracting foreign direct investments, and addressing structural bottlenecks in the economy. The introduction of an Electronic Foreign Exchange Matching System is expected to boost transparency in the FX market and promote strict compliance.
We are of the opinion that the Middle East crisis may be nearing its crescendo as the adverse implications of further escalation are very clear to all parties to the divide on the 1st anniversary of the October 7th attack. We expect America, Europe, and the Arab League to restrain the conflict and contain its impact now more than ever. Our view is based on the singular fact that the entire world needs to combat inflation, and this war has only served to worsen global inflation.
