A slowdown in reserves depletion by US$340m in February 2016


Friday, March 04, 2016 09:13AM / FBNQuest Research

Data from the CBN show that official reserves declined by US$340m in February on a 30-day moving average basis to US$27.8bn. The decline occurred in the first half of the month: this could mean that fx sales by the CBN slowed, that it was able to plug some leakages or that it saw a modest increase in its receipts/inflows.

We cannot be sure of the first explanation since the CBN stopped publishing data for successful bids in 2012, we hope that the second was relevant and we are confident of the third now that oil prices have recovered from their recent low. Reserves at end-February provided 6.2 months’ cover for annual merchandise imports and 4.4 months including services.

We do not think that this decline (of US$3.6bn over 12 months) will prompt a change in exchange-rate policy. Rather, the authorities are more likely in our view to adopt new administrative measures to hold the line.

Official reserves include the balance in the excess crude account, for which the latest figure is US$2.26bn.


Our chart shows one surge in reserves (July 2015) which can only be explained by the plugging of loosely-defined leakages. Ministries, departments and agencies (MDAs) surrendered their domiciliary accounts.

We have looked at the IMF’s literature on assessing reserves adequacy (ARA). It seems that Nigeria belongs to its category of economies with “constrained market access” and so in the greatest (but not quantified) need of a buffer against external shocks (such as the crashing oil price).  

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