May 10, 2019

Modest accretion of official reserves

Gross official reserves increased by US$360m in April to US$44.79bn. This follows a brief surge the previous month, driven by very strong inflows from foreign portfolio investors (FPIs) on the fixed income side just after the re-election of President Muhammadu Buhari. The surge allowed the CBN to accumulate fx at the investors’ and exporters’ window (NAFEX). It has since been replaced by a modest upward trend on the back of oil prices above US$70/b (and stable production of around 1.80mbpd excluding condensates).                                                                                                

  • We also show the reserves position for South Africa and Egypt in our chart but caution that we are not comparing like for like.
  • Some definitions are therefore required. The Nigerian data are gross, cover just fx and exclude swap contracts.
  • The South African series is the most detailed. Gross reserves are the conventional total of SDR holdings at the IMF, gold holdings and fx reserves including foreign currency deposits at the SARB. This figure is then adjusted to deduct those deposits and allow for changes in the forward position, resulting in the international liquidity position in the chart.

Official reserves (US$ bn)

 

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

  • As for the CBE’s data, net and gross international reserves are similar.
  • While Nigeria has a sizeable buffer by any criteria, we should note the trend over the past decade and a half of a diminution in its current-account surplus to a modest level around 1% of GDP.  This is caused by a combination of flat oil exports, and of rising import demand for demographic reasons. Egypt has a regular deficit on its current account, not being a sizeable oil exporter, but can take heart from a growing net surplus on services (US$7.3bn in H2 2018, compared with Nigeria’s rising deficit of US$15.4bn in the same period).