March 14, 2018/Cordros Report
- Nigeria’s external reserves have featured frequently on the pages of national dailies in recent time, and for the good reason – steady accretion!
- Earlier this week, the CBN spokesman, Isaac Okoroafor, issued a statement that the reserves had hit a 5-year high of USD46 billion as at the close of business on Friday, March 9, 2018.
- It is safer to conclude that the reported figure refers to the actual number for the referenced date, hence the variation from the available data on the central bank’s website which captures the 30-day moving average of the reserves.
- From whatever perspective, the external reserves is growing, thanks to a host of positive developments in the macroeconomic landscape.
- 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.
- 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.
- The CBN chief appears to have achieved his desired level of exchange rate convergence in the economy.
- Over the rest of 2018, we weigh political-related risks to the stability of the naira as modest.
- By implication, we look for healthy activities in the equities market and fixed income space.