Gross Official Reserves Declined by US$1.14bn in March 2020 to US$35.16bn

Forex
636 VIEWS
Proshare - Facebook Proshare - Twitter Proshare - Linked In Proshare - WhatsApp
Proshare

Thursday, April 09, 2020 / 09:35 AM / By FBNQuest Research  / Header Image Credit: FBNQuest

                                                                                  

Gross official reserves declined by US$1.14bn in March to US$35.16bn. This was the tenth successive monthly decline. The cumulative fall of US$9.96bn is largely due to the exit of foreign portfolio investors (FPIs). The CBN has sought to keep these players invested in Nigeria with returns close to 15% for longer tenor bills within its open market operations. The exit of this short-term capital has continued, however, as investors have taken fright of the global market headwinds, not least the crashing oil price and its well-documented consequences for Nigeria.


Proshare Nigeria Pvt. Ltd.

                                                                                                           

Total reserves at end-March covered 6.8 months of merchandise imports on the basis of the balance of payments (BoP) for the 12 months to December, and 4.2 months when we add imported services. (The cover has deteriorated with the release of the BoP for Q4 because of the pick-up in merchandise imports and the record outflow for services debits.) For Egypt and its 2018/19 fiscal year (July-June), the comparable figures were 8.2 and 5.9 months.

 

Egyptian reserves, having been stable for one year (see chart), fell by as much as US$5.4bn in March, prompting a rare note of explanation from the central bank. Noting the widespread retreat from EMs, the CBE observed that Egypt had not been spared. It attributed the decline to use of its own “repatriation mechanism” for exiting FPIs, strategic imports and external debt service. Our reading is that the first was the largest element of the depletion of reserves.


Proshare Nigeria Pvt. Ltd.

 

Gross official reserves (US$ bn)

 

Proshare Nigeria Pvt. Ltd.

 

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

 

 

Anecdotal evidence tells us that the CBN is not currently making use of its own mechanism for FPIs to repatriate their exit proceeds.


Proshare Nigeria Pvt. Ltd.

 

Related News

  1. CBN - Market Fundamentals Do Not Support Naira Devaluation at This Time
  2. CBN Suspends FX Sales to BDCs Until Further Notice
  3. Tweak of Exchange Rates - A Bold Move from CBN?
  4. Nigerian Central Bank Sells U.S. Dollar at Weaker Rate Than Previous Peg
  5. Finding The Major Trend Reversal In The Forex Market
  6. Gross Official Reserves Declined By US$1.71bn in February 2020 to US36.30bn
  7. Steady Decline in Nigeria's External Reserves Spark Fresh Concerns Around Exchange Rate Regime
  8. Forex Intervention: CBN Injects $292.34m, CNY 22.8m into Retail SMIS
  9. NCM2020 (28) - Nigerian FX Market Was Highly Variable in 2019
  10. Principles of Forex Trading for Beginners
  11. CBN, FMDQ Introduce Long-Dated FX Futures
  12. February 2020 Foreign Exchange Report - Policy Stance to Ensure Short-term Stability

Proshare Nigeria Pvt. Ltd.
READ MORE:
Related News
SCROLL TO TOP