The Central Bank of Nigeria (CBN) will apply part of the $2.2 billion Eurobond proceeds to exit its numerous swaps as it allayed the market’s fear of further Naira devaluation in 2025.
“No, we are not devaluing”, a dependable source in the apex bank told our reporter in an exclusive interview last week.
The source told InsideBusinessNG that the apex bank would not use the Eurobond proceeds to intervene in the foreign exchange market but to use them to exit the swaps, remove the encumbrances in the foreign reserves, and build the nation’s foreign reserves which currently hover around $42 billion to strengthen the naira.
Nigeria successfully raised $2.2 billion through last year’s Eurobond auction, a significant milestone in efforts to rectify its escalating fiscal deficit. Nigeria recorded a total subscription of $8.8 billion, but only $2.2 billion was allotted. The government planned to apply the proceeds to augment the 2024 budget, which is under strain due to persistent revenue shortfalls and mounting public spending.
“CBN isn’t looking forward to conducting interventions in the foreign exchange market but to exit the swaps. It plans to defend the naira exchange rate within a band of N1,538-N1,580 at which it has closed the market for 2024”.
By its calculation, it will muster the strength to keep the naira within the band by reducing its swap transactions and no new swaps within the first quarter of 2025. “We will not owe any fresh swap”, the bank’s official assured.
The CBN plans to apply the $2.2 billion Eurobond to exit all the existing swaps, which it expects would get liquidity back into the highly encumbered reserves and strengthen the naira exchange rate.
The bank’s official said, “By the time we remove the encumbrances and do a few spots at the interbank, we are hopeful that the naira will appreciate in the first quarter”.
