November 06, 2017 9:08AM /FBNQuest
reserves increased by US$1.33bn in October to US$33.83bn. Since the CBN stepped
up its fx interventions in March by launching multiple currency practices (MCP)
from sales previously of just US$1.5m per day, its reserves have risen by
exports have plainly been a factor but it would be churlish not to acknowledge
that the unorthodox practices have also helped. By way of caution, we should
stress that the figures provided by the CBN are gross and mask the swap
transactions it has entered into with local banks.
The pick-up in
oil production has been an obvious positive for accumulation. Officials are
encouraging the view that it is back at, or close to the 2.0 mbpd level.
Further, the FGN plans to raise US$2.5bn in Q4 2017 from additional Eurobond
sales, for which the market has a good appetite. Separately, it is looking to
refinance NTBs into short=term fx paper within a ceiling of US$3bn.
The CBN will be
boosted by the positive signals from the investors’ and exporters’ window
(NAFEX). Turnover (ie both sides of trades) from its launch in late April
through to 03 November totals US$18.9bn.
The latest boost
has been provided by the return of the offshore investor to local debt markets.
We understand that the CBN’s fx supply to NAFEX is now negligible and we know
that it has reduced its supply to other windows such as that for the retail
segment for invisibles. These various positive developments tell us that gross
reserves are heading towards the US$40bn mark, which level they last touched in
In the past month
the CBN’s position has strengthened and its confidence grown. We do not see a
major change to its MCP either this year or next. The current arrangement suits
the authorities, and they are no real domestic pressure to change tack.