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Trapped Foreign Portfolio Investors Funds Estimated at $4.51bn as CBN Begins Dollar Sales

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With the absence of CBN sales of dollars at the investor and exporters window (I&E) since April, the portion of trapped foreign portfolio investors holdings of maturing fixed income instruments is estimated at $4.51 billion, according to data from Nova Merchant Bank.

Most of the funds are yet to be repatriated and expected to be rolled over to the rest of the year.

“Assuming 25% repatriation of backlog and maturing offshore holdings between September and December, even with resumption of sales to BDC and imports/services demand, the gross reserve could close the year at $31.0 billion on our best-case scenario,” Nova Merchant Bank said.

The investment firms base scenario assumes that if 50 percent of the backlog and maturing offshore holdings are repatriated between September and December, the gross external reserves could end the year at $28.0 billion.

Nigeria’s dollar reserves stood at $35.6 billion as at September 2020, according to data from the CBN.

The apex bank is expected to resume sales to BDC operators starting September 7th, with initial sales of $10,000 per BDC twice a week.

This should result in total monthly sales to BDCs of $295 million.

Nova however expects a gradual increase month on month as activities pick up, with sales over the next four months totaling $2.1 billion.

“Based on our purchasing power parity model (PPP), the fundamental value of naira lies between N427/$ and $430/$ (~11% overvaluation from current NAFEX rate of N386/$),” Nova concluded.

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