CBN to sell dollars to fuel importers, airlines

The Central Bank of Nigeria (CBN) has announced plans to offer dollar forwards to fuel importers, manufacturers, and airlines to help alleviate the backlog of matured FX obligations in the country. Emmanuel Odhienka, a fixed income and currency analyst, provided insights into the current state of the fixed income and FX markets during a recent interview on CNBC Africa. Odhienka highlighted the significance of FX in the Nigerian economy, emphasizing the country's heavy reliance on imports, especially in sectors like fuel. He mentioned concerns about a potential fuel price increase due to issues within the transportation sector but expressed skepticism, citing the government's adherence to its price benchmarks. In response to the FX challenges, Odhienka noted various interventions by the CBN, including retail bids and efforts to mop up liquidity to curb speculative bidding. He also discussed the Debt Management Office's release of the Q2 auction calendar, which aids fixed income players in predicting yield movements. The analyst shared expectations for the Primary Market Auction (PMA), foreseeing minimal changes in the offered tenures. While the interbank market experienced an increase in liquidity by 80 billion as of Wednesday, banks may show limited interest in the PMA due to ongoing SMIS provisions by the CBN to address FX demand. Odhienka pointed out a recent appreciation in the parallel market, with the Naira strengthening to $3.90 against the dollar from $3.99. He credited this to the CBN's weekly interventions, projecting a potential further decrease to $3.85 if the trend continues. Regarding the impact of CBN's dollar forwards on sectors like manufacturing and fuel importation, Odhienka underscored the importance of addressing infrastructure challenges, particularly in the oil sector. He mentioned ongoing initiatives by the government, such as refinery capitalization and licensing modular refineries, to boost local capacity and attract investment. While acknowledging the positive developments in the refinery sector, including the upcoming Dangote Refinery, Odhienka emphasized the CBN's role in supporting vital economic segments with FX interventions. He highlighted the significance of maintaining stable fuel supply to prevent adverse effects on the broader economy. Overall, the CBN's efforts to provide dollar forwards aim to assist key sectors facing FX challenges and stimulate economic growth. Despite lingering uncertainties, stakeholders remain optimistic about the potential for improved market conditions and enhanced sectoral performance in the near future.