Official foreign exchange reserves increased marginally by $40 million in March on a 30-day moving average basis to $27.9 billion, data from the Central Bank of Nigeria (CBN) have shown.
A report by FBN Quest, an investment and research firm, attributed the inflows to three possible causes: that forex sale by the CBN slowed, that it plugged some leakages or that it saw a modest rise in its inflows due to the oil price recovery of about $10/barrel in recent weeks.
The firm said reserves had stabilised over the past six weeks after $910 million decline in January.
Reserves at end-March, it said, provided 6.2 months’ cover for annual merchandise imports and 4.4 months when “we allow for services”. This would constitute adequate cover, were it not for the huge import demand of segments of the economy.
“Our enquiries suggest that the CBN has not slowed its sales of forex, which amount to about $200 million per week. We may have to review our estimates of demand, however, since the CBN last week returned about N400 billion to the banks in naira collateral attached to unmet forex bids,” it said.
FBN Quest explained that a sharp fall from previous weeks could prove a “one-off or could tell us that importers have reduced their orders through their banks because they have adopted a realistic take on forex supply at the CBN”. “At the same time, banks may feel they could better deploy funds currently lodged at the CBN for two days before and two days after the sales. We, therefore, attribute the improved outcome for reserves in March to the oil price recovery and, probably, some steps taken on leakages,” it said.
Gross external reserves stood at $28.33 billion at end-June 2015, compared with $34.24 billion at end-December 2014, representing a decrease of 17.3 per cent. The end-June 2015 level of reserves was equivalent to 5.8 months compared with 7.0 months of imports at end-December 2014. The fall in reserves was due to the sharp decline in foreign exchange inflow from $23.66 billion in the second half of 2014 to $15.28 billion at end-June 2015. The development reflected a decrease of US$8.38 billion or 35.4 per cent. Total foreign exchange outflow was $21.07 billion in the first half of 2015, compared with $26.33 billion in the second half of 2014, indicating a decrease of 20.0 per cent.
