Culled—-Proshare
June 8, 2020
by FBNQuest Research
Nigeria’s gross official reserves recovered by US$3.07bn in May to US$36.60bn. This first monthly increase since May 2019 can be traced to the disbursement by the IMF of the US$3.4bn soft loan it granted Nigeria within its Rapid Financing Instrument (RFI). It follows the depletion of reserves over eleven months totaling US$11.60bn, driven by exits by foreign portfolio investors (FPIs).
The FGN has also sought Covid-19 financing from the World Bank and African Development Bank groups, and other multilaterals. Some of these loans will be subject to policy conditionality, so disbursements may well be staggered or delayed.
Total reserves at end-May covered 7.1 months of merchandise imports on the basis of the balance of payments (BoP) for the 12 months to December, and 4.4 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 in excess of US$1bn.
For Egypt and H2 2019 (the first half of its 2019/20 fiscal year), the comparable figures were 6.6 and 5.4 months.
Taking the BoP for the same six months, however, Egypt compares favourably with Nigeria: current-account deficit of -US$4.6bn, compared with -US$9.7bn; net services inflow of US$13.5bn (outflow of US$17.7bn); net FDI of US$4.7bn (US$0.2bn); and net FPI of US$0.4bn (-US$8.2bn). The Covid-19 experience will have hit Egyptian travel and tourism, and therefore the large services surplus, hard.
Gross official reserves (US$ bn)
Sources: CBN; South African Reserve Bank (SARB); Central Bank of Egypt (CBE); FBNQuest Capital Research
Our chart has Nigeria back above Egypt in May. However, we note that the Nigeria data shows just fx holdings while the Egypt series also includes gold and SDRs. We do not think the Egypt figure reflects its US$2.8bn from the IMF within the RFI and Eurobond sale proceeds of US$5.0bn in May.
