Accumulation the name of the game for the CBN

Gross official reserves increased by US$1.24bn in April to US$47.49bn, the highest since June 2013 and therefore before the latest slide in the crude oil price. The rapid accumulation of US$16.63bn over 12 months is due to two successful Eurobond issues, the recovery in oil export revenues (through the NNPC’s share of production) and, more recently, the steady bid by the CBN at the investors’ and exporters’ window (also known as NAFEX). We should stress that the data are gross and mask the swap transactions the CBN has entered into with local banks.                                                                 

  • This steady bid by the CBN has been viewed both as a response to the softening of demand for fx by importers and other economic actors, which would be consistent with the narrative that household consumption growth remains modest, and as a move to contain naira appreciation.
  • The CBN will be pleased with the healthy signals from the NAFEX window. Turnover (both sides of trades) from its launch in April 2017 through to 04 May totals US$47.1bn. The weekly average has now settled comfortably above US$1.0bn.
  • Reserves at end-April covered 17.5 months’ merchandise imports, and 11.2 months when we add services on the basis of the 2017 balance of payments. The ratios are a little less impressive if we use the measure of current account payments (including income debits) favoured by the ratings agencies.

Sources: CBN; FBNQuest Capital Research


  • We hear the commentary that reserves accumulation with a sizeable contribution from direct investment would be preferable. Inflows from such investment have disappointed (Good Morning Nigeria, 12 April 2018) so the authorities have pushed the second option (chasing portfolio monies). Their thinking is to accelerate accumulation as a buffer against an oil price downturn and/or a change of heart by the offshore portfolio community.

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