Nigeria’s external reserves added $9.1bn in H1-18 to close at $47.8bn, the highest level since 2013. The dramatic rise in the gross external reserves was driven by several factors. Nigeria issued Eurobond worth $5.0bn between Nov-17 and Feb-18, oil export proceeds maintained an upward trajectory, thanks to stability in the domestic production level and higher oil prices which rose to $79.4/b as at the end of H1-18. Furthermore, net capital flow also surged over the last 12 months although largely tracking financial assets, thanks to the introduction of the I&E FX window.
The National Bureau of Statistics (NBS) reported that capital inflows into Nigeria jumped over 600.0% in 2017 and more than 30.0% further in Q1-18 alone. Meanwhile, domestic import bill is much lower due to increased import substitution initiatives by large corporates, a dearer dollar/naira exchange rate and capital control measures imposed by the Apex Bank. Additionally, Nigeria’s trade balance has also rebounded to a surplus position after closing below the water in 2015 and 2016 due to a plunge in oil prices. Accordingly, external reserves closed at $47.8bn in H1-18.
At the current level of the reserves, the Apex Bank can conveniently meet up to 12 months of import. As such, the outlook for the local currency is stable
despite potential pressure in the political space as the build-up to the 2019 general election takes center stage in H2-18.