09 July 2018 ( Lagos ) : Gross official Fx reserves rose by US$180m in June to US$47.79bn, the highest since June 2013. The increase, however, was low in the context of recent months (other than May), which can be explained by greater CBN activity on the offer in response to some portfolio investor exits. 

At the investors’ and exporters’ window (NAFEX), it supplied US$350m in the week ending 22 June. The broader picture is the accumulation of US$17.50bn over 12 months on the back of two successful Eurobond issues, the recovery in oil export revenues and, in healthier conditions, the CBN bid.

Reserves at end-June covered close to 18 months’ merchandise imports, and more than 11 months when analysts add services on the basis of the 2017 balance of payments. The ratios are a little less impressive if analysts use the measure of current account payments (including income debits).

This is a healthy fiscal buffer by any criteria but analysts have to look at definitions to give some context.

The figure of US$47.8bn for Nigeria at end-June is gross and not adjusted for swap contracts. The SARB figure in analyst's chart is the international liquidity position of US$42.4bn. It includes gold and SDR holdings of about US$8bn combined as well as foreign debt issuance, from which deposits arising from the issuance, swaps and fx forwards have been deducted.

Egypt has also been popular with offshore portfolio investors. Its reserves, which include gold holdings, amounted to just US$19.0bn at end-October 2016, shortly before, unlike Nigeria, it signed up for an IMF credit package. Like Nigeria, however, the strong accumulation reflects several Eurobond issues as well as portfolio inflows. The CBE’s data series shows net international, and gross reserves as broadly similar.

Source : Gregory Kronsten, Olubunmi Asaolu, Chinwe Egwim from FBNQuest Capital Limited.

Reporting for EasyKobo on Monday, 9 July 2018 in Lagos, Nigeria