09, 2020 / 3:35 PM / by FBNQuest Research/ Header Image
CBN data show that Nigeria's gross official reserves declined by US$220m in August to US$35.66bn. The FGN is in talks with the World Bank and African Development Bank over loans for Covid-19 and budget deficit financing. Disbursements would flow directly into reserves and compensate for exits by foreign portfolio investors. However, as in 2016 and unlike the US$3.4bn support from the IMF in April within its rapid financing instrument for external shocks, the release of funds is subject to conditionality. The multilaterals are said to be seeking assurances over the CBN's exchange-rate policies.
Total reserves at end-August covered 7.0 months of merchandise imports per the balance of payments for the 12 months to March, and 4.3 months when we add imported services.
These figures should be adjusted downwards, however, for the pipeline of delayed external payments that has accumulated since late March. The CBN did experiment with supplying the investors' and exporters' window on a small scale last week.
The monthly import cover will look better in Q2 and Q3. Fx shortages and the halt to international travel, which was only lifted last weekend, will together bring about a sharp decline in imports of goods and services.
The CBN's data series shows one figure for gross fx holdings of US$35.7bn., which includes swap arrangements on an undisclosed scale.
Gross official reserves (US$ bn)
Sources: CBN; South African Reserve Bank (SARB); Central Bank of Egypt (CBE); FBNQuest Capital Research
The comparable figure for South Africa at end-August was US$45.3bn including foreign currency deposits banked, to which we add gold and SDR holdings to reach gross reserves of US$55.7bn. We then deduct the same deposits and adjust the figure for forward transactions such as swaps. This gives us the international liquidity position of US$50.5bn in the chart.