Friday, May 6, 2016 10:17AM/FBNQuest Research
Data from the CBN show that gross official reserves declined by US$780m in April on a 30-day moving average basis to US$27.1bn. The average has been an outflow of US$450m in the nine months since the one-off bonus of July 2015 when the CBN acquired the fx deposits of US$2.5bn of government departments and agencies.
The authorities are struggling to contain the depletion of reserves in the face of strong import demand. The CBN estimated in January that its monthly supply of fx for sale had fallen to US$1bn from as much as US$3.2bn (before the start of the oil price slide in mid-2014). The supply would have picked up with the US$15/b rise in the oil price since January.
The CBN’s weekly sales amount to about US$200m.
We do not see a sharp rebound in the oil price in the months ahead and so expect that the “backlog” in unmet demand will continue to grow. That demand has eased in recent weeks on the basis of the naira collateral the CBN returns to the banks for unsuccessful bids. Once we allow for the “froth” in the bids, however, a sizeable gap remains.
Reserves at end-April provided 6.2 months’ cover for annual merchandise imports and 4.7 months when we allow for services.
We feel the need to explain our use of data. We cite national sources as a matter of policy and would do so even if there was a choice, which there rarely is. This will remain the case when a particular data release conflicts with conventional wisdom.
11. A modest decline in reserves – May 07, 2015
12. A further sharp decline in reserves – May 05, 2015