Towards the US$50bn threshold, and counting

Gross official reserves increased by US$3.76bn in March to US$46.26bn, the highest since August 2013. The rapid accumulation of US$15.96bn over 12 months is due to two sizeable Eurobond launches, a small diaspora bond issue, 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.

  • The steady bid by the CBN has been seen variously as a response to the softening of demand for fx by importers and other economic actors, 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 April totals US$41.7bn. The weekly average has now settled above US$1.0bn.
  • Reserves at end-March covered 17.0 months’ merchandise imports, and 10.9 months when we add services. These calculations are based on the balance of payments for 2017. The ratios are a little less impressive, but still robust, if we use the measure of current account payments (including income debits) favoured by the ratings agencies.


Sources: CBN; FBNQuest Capital Research


The communique from this week’s meeting of the monetary policy committee urged the CBN to continue accumulating reserves as a buffer against an oil price downturn and to sustain investor confidence. It might have added as a means to underpin its exchange-rate management. We support this thinking although we did find in the communique the subtext that investors might cut and run en masse. In practice, they have different mandates, risk appetites and strategies.

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