Will Nigeria sustain fight against FX speculators?

The financial market in Nigeria is abuzz with activity as 1.18 trillion naira worth of Treasury Bills are set to mature this week. The Governor of the Central Bank of Nigeria, Olayemi Cardoso, has assured the public that the apex bank will continue to maintain order in the country's foreign exchange market. To shed more light on these developments, Bankole Odusanya, Chief Dealer, Treasury at Polaris Bank, joined CNBC Africa for an insightful discussion. In the Treasury market, recent weeks have been exceptionally busy due to auctions and an influx of securities. This increase in activity is in line with the expansion of the budget, which has grown from an initial plan of 49 trillion naira to 54 trillion naira. As the first quarter comes to a close, the Debt Management Office (DMO) has been issuing a substantial amount of instruments to raise cash. Looking ahead to the second quarter, there is anticipation for a bond calendar that may introduce new instruments such as the 2035 bond, alongside a moderate increase in Treasury Bills issuance. Moreover, the Minister of Finance has hinted at the possibility of issuing additional Eurobonds this year, with reports of a forthcoming 300 billion naira Sukuk issuance. This diverse mix of instruments aims to cater to various investors in the market, providing options for both traditional government securities and alternative bonds like Sukuk. Despite expectations for Treasury Bill rates to decrease, recent market dynamics have led to an increase in yields. Global market fluctuations, particularly in Sub-Saharan instruments, prompted foreign investors to sell assets and seek safer options. This surge in demand caused Treasury Bill rates to rise from 17.8% to 19.6%, stabilizing around the 19.5% mark. While the initial movement was driven by external factors, the market has now found a more balanced footing. In the currency market, the Nigerian Naira has experienced slight fluctuations, moving from 14.90 to 15.40 over a 15-day period. Speculative pressures from local oil marketers sourcing USD for refinery activities have added some strain. However, the Naira has remained relatively stable, thanks to attractive yields in the fixed income market and the active interventions of the Central Bank. Governor Cardoso reaffirmed the bank's commitment to ensuring Naira stability amidst speculative activities. When discussing the borrowing dynamics between the DMO and CBN, the balancing act between attracting foreign investments and managing sustainable debt levels becomes crucial. While February saw a decline in rates due to high local and foreign interest, recent adjustments have positioned Treasury Bill rates at 19% to 20%, enticing investors to participate. The expectation is for these rates to remain steady, creating an environment that benefits both domestic and international investors. In conclusion, the Nigerian financial market is navigating a period of heightened activity and evolving dynamics. While challenges like global market trends and speculative pressures persist, the market players remain resilient. With proactive interventions from regulatory bodies and a diverse mix of investment instruments, the outlook remains optimistic for Nigeria's financial landscape.