December 11, 2023/FBNQuest Research
According to the CBN’s most recent data on external reserves, Nigeria’s gross official reserves fell by –USD392m m/m to USD33.0bn in Nov ’23. The decline implies that the gross external reserves have depleted by c.USD4.1bn over the eleven months to Nov ’23, indicating an average monthly depletion rate of USD371m. In addition to demand pressure from the CBN’s interventions on the foreign exchange market, a secondary factor responsible for the marked decrease are coupon payments on Nigeria’s Eurobonds, totaling roughly USD149m during the month.
Total reserves as at end-Nov ’23 covered 7.7 months of merchandise imports on the basis of the balance of payments for the 12 months to Jun ’23 and 5.7 months when we add services.
However, for a more accurate picture, we must adjust the gross reserve figure for the pipeline of delayed external payments and the encumbered portion of the reserves.
As shown by our chart below, the external reserve position of South Africa and Egypt, the other two markets that we track on the continent, improved m/m.
South Africa’s international liquidity position, which comprises its gross reserves, gold reserves, and forward positions, which combined are netted off for some less liquid portion of the reserves, increased by USD809m m/m.
The m/m rise was attributed to higher gold prices, foreign currency valuation adjustments, and asset price fluctuations.
Egypt’s external reserves saw a modest increase of USD70m to USD35.2bn. Notably, these reserves have shown a steady recovery, rebounding from a sharp decline in 2022 attributed to challenges in the balance of payments.
The new CBN leadership has begun addressing the structural issues with the fx policy, starting by clearing some of the fx backlog.
Looking forward, we expect that recent international engagements by the government will result in much-needed foreign exchange liquidity into the country.
