A second monthly decline in reserves

Gross official reserves declined by US$1.28bn in August to US$45.84bn. This was the second successive monthly decline. July’s of US$670m was largely due to the repayment by the FGN of US$500m to holders of a maturing Eurobond that is yet to be refinanced. This latest decline can be attributed to the changed stance of some players in the offshore community. Nigeria has suffered from contagion emanating from large and liquid EMs such as Argentina and Turkey. Policy flaws have contributed to the very large hits taken by these two markets.


  • There have been no obvious flaws adding to the much smaller hit taken by Nigeria. It appears that offshore fixed-income players have sometimes exited the market on the maturity of their investments. Their remaining holdings have been credibly estimated at US$20bn.


  • The trend in weekly transactions at the investors’ and exporters’ fx window (NAFEX) has been downwards. Last week they rose well above US$1bn for the first time since late June. (The transactions cover both sides of trades.)


  • Separate data collated by FMDQ show that the CBN has been the largest source of inflows in the last five weeks reported.


  • Reserves at end-August covered 16.4 months’ merchandise imports, and 9.9 months when we add services on the basis of the balance of payments through to March 2018. This is a healthy fiscal buffer by any criteria.
Gross official reserves (US$ bn; 30-day moving averages)

  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. It also includes Eurobonds, which can be justified on the grounds that these are FGN borrowings lodged with the CBN.


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