Tuesday, April 05, 2016 9:30AM /FBNQuest Research
Data from the CBN show that official reserves increased marginally by US$40m in March on a 30-day moving average basis to US$27.9bn. Following a sharp decline in January of US$910m, reserves have stabilised over the past six weeks, for which we offer three possible explanations: that fx sales by the CBN slowed, that it plugged some leakages or that it saw a modest rise in its inflows due to the oil price recovery of about US$10/b in recent weeks.
Reserves at end-March provided 6.2 months’ cover for annual merchandise imports and 4.4 months when we allow for services. This would constitute adequate cover, were it not for the huge import demand of segments of the economy.
Our enquiries suggest that the CBN has not slowed its sales of fx, which amount to about US$200m per week.
We may have to review our estimates of demand, however, since the CBN last week returned about N400bn to the banks in naira collateral attached to unmet fx bids. This sharp fall from previous weeks could prove a one-off or could tell us that importers have reduced their orders through their banks because they have adopted a realistic take on fx supply at the CBN.
At the same time, banks may feel they could better deploy funds currently lodged at the CBN for two days before and two days after the sales.
We therefore attribute the improved outcome for reserves in March to the oil price recovery and, probably, some steps taken on leakages.
10. A modest decline in reserves – May 07, 2015