Official reserves settled on a plateau

Gross official reserves declined by US$670m in July to US$47.12bn. This was the first monthly decline since June 2017, and follows two months of modest increases. One overlooked reason for the decline was the repayment by the FGN of US$500m to holders of a maturing Eurobond, which is yet to be refinanced. For a broader explanation of the stability and small fall over three months, we have to look at the investment thinking of the offshore community. Nigeria has lost its sparkle with this community although there remains a good case for fixed-income investment.


  • Weekly transactions at the investors’ and exporters’ fx window (NAFEX) were running comfortably above US$1bn through to late June but have since fallen  to a range between US$750m and US$900m. (The transactions cover both sides of trades.)
  • Separate data collated weekly by FMDQ show a trend decline in portfolio inflows and in sales of fx by the CBN.
  • Reserves at end-July covered 16.8 months’ merchandise imports, and 10.4 months when we add services on the basis of the balance of payments through to March 2018. The ratios are a little less impressive if we use the measure of current account payments (including income debits).
  • This is a healthy fiscal buffer by any criteria. Among the convergence criteria for entry into the proposed West African Monetary Zone, for example, is a buffer of six months’ cover.

Sources: CBN; FBNQuest Capital Research


  • The CBN’s definition of gross reserves excludes gold and SDR holdings but includes swap transactions with local banks, for which the largest independent estimate we have seen is US$7bn.


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