Tuesday, December 08, 2020 / 08:40 AM / By FBNQuest Research / Header Image Credit: CNBC
We
see from CBN data that Nigeria's gross official reserves declined by USD280m in
November to USD35.41bn. Since the receipt of IMF loan proceeds of about
USD3.4bn in May to tackle the Covid-19 virus, the CBN has managed to hold
reserves broadly stable, with a downward bias amounting to a fall of USD1.18bn
over six months. Its achievement has to be qualified with the caveat that a
pipeline of delayed external payments has developed since late March, estimated
at USD3bn by the IMF. A large share of the pipeline consists of the
repatriation proceeds of exiting foreign portfolio investors (FPIs).
Total reserves at end-November covered
7.5 months' merchandise imports per the balance of payments (BoP) for the 12
months to end-June, and 4.8 months when we include imported services. The cover
will look better when we see the BoP for Q3'20 because of the compression of
imports, notably services in the light of the then closure of Nigeria's
international airports.
Egypt is often compared with Nigeria.
Both secured the condition-free IMF credit to confront external shocks (Covid
in this case). Egypt has also signed a traditional Fund programme and developed
a better credit story. There is no payments pipeline and EM investors have
returned in numbers to its local financial markets in the past two months.
Its BoP for 2019/20 (July-June) looks
somewhat stronger. Egypt posted a services surplus of USD9.0bn, compared with
Nigeria's deficit of USD28.2bn in the same period. Further, it attracted FDI
inflows of USD7.5bn (vs USD2.1bn), and inward remittances of USD27.8bn and
rising (vs USD23.0bn and falling).
The CBN's series shows just fx and
does not specify its swap arrangements. In its latest ratings action for
Nigeria at the end of September (a change in its outlook from negative to
stable), Fitch estimated such obligations at USD5.4bn. The CBN does share
movements on swaps (inflows and outflows) in one of its quarterly publications
but not the underlying stock.
The comparable figure for South Africa
at end-November was USD44.1bn, to which we add SDR holdings at the IMF and gold
reserves to arrive at gross official reserves of USD53.8bn. We then deduct fx
deposits (which were part of fx reserves) and forward transactions such as
swaps. This gives us the international liquidity position in the chart of
USD51.3bn.
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Gross official reserves (USD bn) |
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Sources: CBN; South African Reserve Bank (SARB); Central Bank of Egypt
(CBE); FBNQuest Capital Research |
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