Thursday, September 03, 2015 8:58 AM / FBN Capital Research
Data from the CBN show that official reserves decreased by US$100m in August to US$31.3bn on a 30-day moving average basis. This compares with the rise of US$2.5bn the previous month, which can be attributed in part to the CBN circular of 23 June ruling that 41 imported goods were no longer eligible for fx from either the interbank market or the bureaux de change.
Well-informed estimates suggest that such imports had accounted for 20% of fx utilization, which we would translate into a one-off gain of US$900m per month. Another explanation for the rise in July was the transfer of some of the NNPC’s fx reserves from the banks to the CBN.
We had expected pressure on official reserves last month, given that the average spot price of Bonny Light was almost 20% lower than in July.
Additionally, the CBN stepped up its fx sales in the market in August, particularly in the global market turbulence in the latter part of the month.
These two factors would normally indicate a larger decline in reserves. Conversely, import demand should ease in the face of the slowdown in the economy, the CBN’s range of administrative measures and the fact that banks are rejecting dollar deposits in cash.
This leads us to the narrative that the plugging of fx leakages has begun. The theory cannot, by definition, be properly tested but was likely a factor behind the surge in reserves in July
Official reserves include the balance on the excess crude account. The latest figure in the public domain (from the federal finance ministry at the time of the FAAC announcement last month) is US$2.3bn.
The latest data (from end-March) put the CBN’s share of official reserves at 85% of the total.