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By Chinwendu Obienyi
Against the backdrop of a $3.35 billion direct allocations approved by the International Monetary Fund (IMF), financial experts have observed that Nigeria’s foreign reserves have been projected to surpass the $40 billion threshold by September 2021.
According to them, Nigeria is regarded as the largest relative gainer from the Special Drawing Rights (SDR) allocation within their coverage universe.
SDRs are the IMF’s unit of account and are basically the fund’s reserve assets held by member countries.
Delivering a report during a virtual financial roundtable organised by EFG Hermes, experts who spoke at the premier financial services corporation in frontier emerging markets, said that the direct allocation would boost reserves by 10 per cent while an additional planned minimum $3 billion Eurobond issuance could boost it by 20 per cent to over $40 billion.
They further added that such a boost will complement high crude oil prices to improve the country’s FX position.
Addressing the recent ban placed on the Bureau De Operators (BDCs), EFG Hermes, noted that the decision taken by the Central Bank of Nigeria (CBN) chops off nearly $450 million per month of FX supply (30 per cent of total FX supply to the market) on face value.
“CBN had recently taken a relatively symbolic move to unify exchange rates; possessing the ammunition to ease FX shortages later this summer would encourage further Naira weakness (we maintain a target of N430/$1), together with further upward adjustment in domestic market rates. We would turn way more bullish if Nigeria benefited from on-lending, but we see it unlikely that this administration would engage in an IMF programme of any sort,” the report said.
