Tuesday, June 11, 2019 / 08:55AM / FBNQuest Research
Gross official reserves increased by US$330m in May to US$45.12bn. Whether the modest accretion of the past two months continues for a third hinges upon foreign portfolio investors (FPIs) on the fixed income side and the direction of the oil price. Signals that the Federal Reserve, having stalled its policy of normalization, may move to a rate cut should underpin the holdings of FPIs. For the oil price, we are looking to a positive stance from OPEC+ to offset the negative impact of global trade tensions. We are currently more confident on the first point than the second.
We also show the reserves position for South Africa and Egypt in our chart but caution that we are comparing apples with pears. The Nigerian data are gross, cover just fx and exclude swap contracts.
The South African series is the most detailed. Gross reserves are the conventional total of SDR holdings at the IMF, gold holdings and fx reserves including foreign currency deposits at the SARB. This figure is then adjusted to deduct those deposits and allow for changes in the forward position, resulting in the international liquidity position in the chart.
Official reserves (US$ bn)
Sources: CBN; South African Reserve Bank (SARB); Central Bank of Egypt (CBE); FBNQuest
As for the CBE’s data, net and gross international reserves are similar.
Nigeria’s stated reserves provide cover for 13.3 months of merchandise imports at 2018 levels, and 7.5 months when we add services. For Egypt and for the 2017/18 fiscal year (July-June), the comparable figures are 8.4 months and 7.2 months. Its imports of goods are far higher than Nigeria’s but its services account is much stronger.