Culled—Proshare
May 11, 2020
by FBNQuest Research 
Nigeria’s gross official reserves declined by US$1.64bn in April to US$33.52bn. This was the eleventh monthly decline in succession. This cumulative fall of US$11.60bn is largely due to the exit of foreign portfolio investors (FPIs). A recovery of sorts is assured now that the IMF has disbursed US$3.40bn under its Rapid Financing Instrument (RFI) to tackle the impact of Covid-19. Additional concessional financing is likely from other partners, notably the World Bank and African Development Bank groups. Such inflows flow directly into reserves. The cash from the RFI has already been banked.
Total reserves at end-April covered 6.5 months of merchandise imports on the basis of the balance of payments (BoP) for the 12 months to December, and 4.0 months when we add imported services. These figures should be adjusted, however, for the pipeline of delayed external payments, largely repatriation proceeds due to FPIs and now estimated at close to US$1bn.
For Egypt and its 2018/19 fiscal year (July-June), the comparable figures were 8.2 and 5.9 months.
Egyptian reserves, having been stable for one year, have fallen by US$8.5bn in two months. This has prompted commentary by the central bank, which noted the generalized retreat from EMs, and stressed that the CBE had deployed its own “repatriation mechanism” for exiting FPIs. Additionally, it paid out US$1bn in April on a maturing Eurobond it did not refinance.
Gross official reserves (US$ bn)
Sources: CBN; South African Reserve Bank (SARB); Central Bank of Egypt (CBE); FBNQuest Capital Research
The CBE’s latest statement noted that the government had also applied to the IMF to tap the RFI. In Egypt’s case disbursement may be less rapid since it has also sought a Stand-By Arrangement, which, unlike the RFI, has policy conditionality attached and has to be negotiated.