CBN to issue eurobands and international loans this year – CMB analysts


Coronation Merchant Bank (CMB) Analysts have explained that “Although foreign exchange reserves fell steeply during the second half of 2019, we believe there will be sufficient sources of US dollars in 2020 for the CBN to support foreign exchange reserves. These include possible issue of eurobands and international loans.

The $3.5 billion eurobond that would be issued when concluded would boost the nation’s foreign reserve and help in mitigating currency risk.

At Coronation Breakfast Session, Analysts expressed their view on the Naira that the currency would not be devalued this year. “They relied on CBN policies on foreign exchange reserves to arrive at this conclusion even though speculations are rive in certain quarters that the Naira could be devalued this year 2020.”

The naira devaluation, low yield on Treasury bills,  among others were resolutions reached at the Coronation Breakfast Session with the theme: “Re-risking the financial earch, Coronation Asset Management Mr. Guy Czartoryski, , expressed optimism that the CBN had strategically mapped out economy policies that would ensure exchange rate stability in the country.

He expressed that the apex bank would keep the exchange rate at close to N362.50 per a dollar for most of this year.

“The recent history of the Naira/US dollar exchange rate shows that 20 per cent over-valuation of the Naira, in terms of fair value, is associated with devaluation. Such a level may be reached during 2021, but the risks of this happening in 2020 are low.”

On interest rate, he anticipated downward pressure on T-Bill and government bond rates to continue as domestic funds rotate from high-yielding CBN OMO bills into government securities.

He noted that bank earnings may suffer somewhat from the CBN’s initiative to limit the scope of card charges.

He noted that “this will likely be offset by balance sheet expansion and a degree of interest rate protection from high-yielding securities.

Also speaking, the bank’s Head, Trading & Fixed Income, Mrs. Iyobosa Sorae said that Naira devaluation would not happen in the short-term, 2020.

“If you look at where we are today, if you look at output on month-to-month, I think we are well positioned to weather this year. To put a caveat to it, we are looking at the short-term, we are speaking for just 2020, we are not speaking into 2021,” she said.

According to her, the apex bank had already put in place strategies to ensure naira stability such as issuance of Euro Bond and bilateral loans, among others.

Sorae stated that the eurobond that is going to be issued, they are currently on a road show that should happen probably before the end of the first quarter or early in the second quarter.

“The $3.5billion eurobond would add to the nation’s reserve, if you look at where we are, we are about $36 billion and if you add the eurobond money it will take the reserve to about $39 billion.

“We can decide to take bilateral loans from the likes of the World Bank and IMF.

“We can decide to take these loans and if we are taking the loans in tranches of a billion, two billion it then means that foreign exchange reserve at the end of the day might be comfortably be sitting at $40 billion.

“If we get $40 billion in reserves do we see a devaluation. It’s based on these statistics that we are saying for this year, we think CBN is on the right foot as regards the currency,” she added.