Nigeria’s gross external reserves fell by nearly $506 million in August 2024 due to persistent outflows that lasted 16 days, according to Central Bank data. The outflow from the nation’s gross external balance exceeded the government’s domestic US dollar bond sales to retail investors.
The market anticipates the release of the Debt Management Office’s (DMO) $500 million domestic US dollar bonds, which expired last week. The total balance of external reserves rose to $36.872 billion in early August.
In the following days, it is increasingly possible that the Central Bank of Nigeria (CBN) would conduct retail Dutch Auction System, where it is expected to sell enormous US dollars to authorized dealer banks.
The CBN received more than $1 billion FX bids from authorised at the last FX auction that happened at the same time when external reserves was at the peak.
“We expect currency pressures to persist due to limited FX supply, stemming from minimal CBN intervention and weak FPI participation”, analysts at Cordros Capital Limited said.
Analysts said that successful completion of the domestic $500 million US Dollar Bond scheduled to close on Friday could bolster the CBN’s efforts in stabilizing the naira in the short term.
Last week, the monetary authority conducted two open market operations (OMO bills) auctions. The auction was met with significant investors’ interest seeking to park fund in short term investment options.
The CBN is selling OMO bills to banks and foreign portfolio investors only. In 2019, the CBN excluded non-bank locals (individuals and corporations) from participation in its Open Market Operations (OMO) at both the primary and secondary market.
