11, 2021 / 08:54 AM / by FBNQuest Research / Header Image
We learn from CBN data that Nigeria's gross official reserves declined by USD40m in December to USD35.37bn. Since the disbursement of IMF loan proceeds of about USD3.4bn in May to tackle the external shock of the Covid-19 virus, the CBN has almost held the line on reserves, with a decline of USD1.22bn over seven months. This 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 good proportion of the pipeline consists of the repatriation proceeds of exiting foreign portfolio investors (FPIs).
FX supply at the Investors' and Exporters' (I&E) window has picked up over the past three months thanks to flows from local sources (the CBN and local non-bank corporates, principally). That said, the level seen in December was less than half that in the 'normal' month of February, when fx was available for all end-users.
Total reserves at end-December 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.
For FPIs there are obvious parallels to be drawn with Egypt. Both countries secured the condition-free IMF credit to tackle external shocks. Further, Egypt has signed up for an orthodox Fund programme, which for many investors has helped it to develop a better credit story. There is no payments pipeline and EM investors have returned in numbers to its local financial markets.
In 2019/20 (July-June) Egypt posted a services surplus of USD9.0bn, compared with Nigeria's deficit of USD28.2bn in the same period.
CBN's series shows merely FX without SDR holdings and gold. It does not provide any colour on its swap arrangements. At the end of September 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.
For South Africa, FX and gold reserves together totalled USD55.0bn at end-December. We then deduct FX deposits (which were part of FX reserves), the forward position and other transactions to arrive at the figure of USD52.1bn for the international liquidity position in the chart.
The year has opened well for the EM universe in terms of FPI flows. We hear from our good friends at FBN (UK) that net global inflows ytd have amounted to USD2.0bn for bonds and USD2.6bn for equities.
Gross official reserves (USD bn)
Sources: CBN; South African Reserve Bank (SARB); Central Bank of Egypt (CBE); FBNQuest Capital Research