Despite the continued intervention in the country’s foreign exchange segment of the interbank market, data available on the website of the Central Bank of Nigeria (CBN) on March 29, 2018 shows that external reserves grew by $3.71bn, or 8.75% in one month.
Nigeria’s external reserves level climbed from $42.492bn at the end of February to $46.208bn on March 28, 2018.
In the two weeks between March 14 and 28, 2018, the reserves level grew $1.875bn or 4.23% from $44.333bn; while on a Year-to-date, the figure rose from $38.765bn on December 29, 2017, representing an increase by about $7.442bn or 19.2% jump.
A further breakdown of the data showed that Year-on-Year, external reserves appreciated by all of $15.906bn or 52.49% from $30.302bn; much more than the humble $2.431bn or 8.72% it climbed in the prior one year from $27.87bn.
Reacting however to a statement by Isaac Okorafor, spokesman of the CBN that the nation’s FX reserves had risen to $46bn in a note to its clients, Peter Moses, an analyst at Cordros Capital, an investment banking outfit in Nigeria supported by a combination of rising oil earnings involving higher oil prices and production volume; strengthening foreign portfolio inflows, catalyzed by the stable operations of the investor and exporters’ FX window, as well as proceeds from external borrowings (such as the US$2.5bn Eurobond recently issued. He listed other factors as slower pace of CBN intervention in the currency market (US$1.45bn monthly average thus far this year, compared to about US$2bn monthly average in March-May 2017); “the apex bank’s continued efforts at discouraging unnecessary imports; and to be fair, decent inflows from non-oil exports.
“Clearly, the monetary authority is walking the talk of deliberating growing the foreign reserves – which it expects to hit USD60 billion in 2019 under prevailing anchors,” he added.
Continuing, he stressed: “Our base case outlook scenario – as highlighted in our Nigeria 2018 Outlook report “Looking Beneath the Surface” – for the naira in 2018 assumes an external reserves position of USD47billion (on a 30-day moving average basis). We were of the view that under this scenario, the CBN is unlikely to implement material changes to its FX policy, and forecast the local currency will hover around NGN360-NGN365/USD and NGN363-NGN368/USD in the I&E FX window and parallel market respectively. But at the current run rate of average cumulative monthly growth of 4.84%, we estimate the reserves to hit our forecasted target during H1-18, thus making the case for our 2018 best case reserve projection of USD56 billion, at which level we expect the central bank to adopt more market friendly FX reforms. The big question then is “will the naira reflect the steady accretion to the reserves by way of notable appreciation”?
“That said, we note recent indications from the CBN governor that there is a deliberate attempt by the bank to keep the naira exchange rate in the I&E FX window at current levels. In our view, the aim of that is to (1) keep local assets attractive to foreign investors and further support the CBN’s efforts at growing the reserves, and perhaps (2) further stimulate exports.”
