Naira crashes, CBN issues new rule on usage of domiciliary accounts

The Nigerian Naira faced immense pressure last week, plunging to a record low of $490 against the dollar in the parallel market. This downward spiral prompted the Central Bank of Nigeria (CBN) to issue new guidelines for the proper use of domiciliary accounts in the country. Steve Warshore, the Co-Managing Partner of Comercio Partners, joined CNBC Africa to discuss Nigeria's fixed income and FX markets and shed light on what the future may hold for the struggling currency. Warshore expressed concerns about the lack of stability in the Naira's value moving into the fourth quarter. He highlighted the continuous pressure on the currency due to uncertainties in the market and the inadequate supply of foreign exchange through official channels. Warshore emphasized the need for significant interventions to address the Naira's volatility. When questioned about the direction of yields in the upcoming quarter, Warshore noted that the government's increased borrowing in the treasury market signaled a potential rise in yields. Despite some stability observed in the yield curve for various Treasury bills and bonds, the overall trend could point towards higher yields as borrowing activities surge. The most pressing issue remains the outlook for the currency. Warshore acknowledged the possibility of the Naira hitting $600 against the dollar if drastic actions are not taken. He emphasized the importance of restoring market confidence through effective supply management and transparent interventions by the central bank. Foreign investors are closely monitoring Nigeria's investment landscape, with offshore players and financial institutions showing interest in the market despite lingering concerns about inflation. The relatively high returns on Nigerian assets, surpassing the inflation rate, continue to attract investors who seek profitable opportunities amidst global uncertainties. In conclusion, Warshore hinted at a potential uptick in yields but remained optimistic about the investment prospects in Nigeria. As the country navigates financial challenges and strives for stability in its currency and bond markets, proactive measures and strategic interventions will be crucial in determining the economic trajectory in the fourth quarter and beyond.