Today’s chart shows that Nigeria’s gross official reserves increased by USD32.5m to USD39.6bn in April. The rise follows five months of attrition. Prior to the latest accretion, the reserves were declining by roughly USD450m on average per month over the period. Proceeds of the USD1.25bn Eurobond issued in March appear to have had minimal impact on reserve levels. However, it is important to keep in mind that the CBN's external reserve data is based on a 30-day moving average. As such,  distortions caused by large inflows and outflows tend to be smoothened out.

Total reserves as at end-April covered 9.5 months’ merchandise imports based on the balance of payments for the 12 months to September ‘21, and 7.2 months when we add services. We consider this a healthy buffer.

However, for a more accurate picture, we must adjust the gross reserve figure (and the import cover) for the pipeline of delayed external payments, whatever the figure is now.

According to local media reports, foreign airlines operating in the country have about USD300m in funds stranded in the country.

Despite the elevated oil price environment, oil receipts, the major source of augmentation for the reserves have not been as robust as usual, largely because of lower oil production caused by oil theft and inadequate evacuation infrastructure.  

We see from OPEC’s monthly report that Nigeria’s oil production fell by around 20,000 barrels per/day (mbpd) to between 1.2mbpd and 1.35mbpd in March compared with February levels, depending on the source. This is well below Nigeria’s production quota of c.1.7mbpd.

In the absence of tangible accretion from oi receipts, the only other sources of potential accretion to the reserves are external borrowings via Eurobonds, and perhaps soft loans from multilateral agencies.

Based on the 2022 budget, Nigeria still has spare capacity to tap the international debt market for close to USD4.8bn after adjusting for the USD1.25bn Eurobond issued in March