Nigerian Foreign Reserves at Record Low

According to the Central Bank of Nigeria (CBN), reported levels of the Nigerian External Reserves (“the Reserves”) as at 15th of April 2015 stands at US$29.3bn – its lowest level since 2010. Worthy of note is the fact that the Reserves have been on a downward trend since the beginning of the year on the back of falling global oil prices and CBN’s resolve to defend the Naira. The Reserves has declined US$5.0bn (16.9%) in 2015 despite CBN’s relentless effort to keep it upbeat.

Further analysis showed that declines were at their highest on February 16th and 23rd  at 1.2% each) – corresponding to the days after the postponement of the Nigerian 2015 General Elections (16th February) and shutdown of rDAS window (23rd February). The Reserves declined at a daily average of 0.2% before and after the official window was scrapped. Hence, rate of decline did not moderate despite the CBN’s move.

At current level of Reserves, the country’s Import Cover (ratio of Foreign Reserves to average monthly Import) based on our estimates can barely cover 6-months of import (International standard). While inflow to the Reserves remained impaired by lower prices of crude oil in the global market (as oil revenue accounts for approximately 90.0%of the Reserves accretion), we suspect that the Apex bank’s monetary policy committee may be moved to take a major decision on exchange rate at its next seating in May. Perhaps, taking the bull by the horns to float Nigeria’s exchange rate.

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