Nigeria’s FX reserves depletion slows

Data from the Central Bank of Nigeria (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,” FBN Quest analysts led by Gregory Kronsten said in a recent note.

Reserves at end-February provided 6.2 months’ cover for annual merchandise imports and 4.4 months including services.

The FBN Quest analysts said they 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 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 $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,” Kronsten said.

PATRICK ATUANYA