A still healthy buffer at the CBN

Gross official reserves declined by US$1.53bn in September to US$44.31bn. This third successive monthly decline can be attributed to changes in the sentiment of foreign portfolio investors (FPIs) in the wake of the headwinds driven by US monetary policy. Previously a consistent buyer, the CBN has therefore become a source of fx at the investors’ and exporters’ window (NAFEX). For nine of the ten latest weeks for which the data is available (through to 24 to 28 September), it has been the largest source of such inflows.


  • Reserves at end-September covered almost 17 months’ merchandise imports, and close to 10 months when we include services on the basis of the balance of payments to June 2018.

  • The cover therefore greatly exceeds the minimum of six months among the convergence criteria set by the West African Monetary Zone for its putative single currency. This healthy buffer, however, has to be put in context with some definitions.

  • The Nigerian data are gross, cover just fx and exclude swap contracts. The South African series in our chart shows the international liquidity position. This measure includes gold and SDR positions at the IMF of about US$7bn combined along with fx, and deducts swaps and deposits arising from foreign debt issuance. It could be profitably adopted by the CBN.

Sources: CBN; South African Reserve Bank (SARB); Central Bank of Egypt (CBE); FBNQuest

Capital Research

  • Turning to the CBE’s data, net international and gross reserves are similar. We show Egypt for the parallels with Nigeria: both made fx reforms to attract offshore portfolio players and both have tapped the Eurobond market. Stable reserves for Egypt and a decline for Nigeria although the latter can look forward to another Eurobond issue and support from the firmer oil price.


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