Nigeria's external reserves are set to hit six months high of $45
billion before the end of this month as foreign portfolio investors,
FPIs, sustained dollar injection in a bid to take advantage of the
double digit interest rate on Nigeria’s fixed income instruments.
Last week the reserves maintained upward trend for the sixth
consecutive week. Data from the Central Bank of Nigeria, CBN, showed
that the reserves rose to $44.722 billion as at Thursday, April 11, from
$44.683 billion on Thursday April 4, implying weekly increase of $39
million.
Further analysis showed that the reserves have gained $294 million
dollars from $44.428 million since the beginning of the month. With this
upward trend expected to continue, the reserves will hit $45 billion
before April 30.
This will translate to the highest level of external reserves for
the country in six months, specifically since September 18 when the
reserves stood at $45.002 billion. After falling persistently for seven
months, from peak of $47.989 billion on July 5, 2018, the reserves
commenced steady ascent from $41.296 billion on February 28. Since then
the reserves have gained $3.43 billion or 8.3 percent.
This sharp gain is driven by increase in crude oil price and huge
dollar injection by foreign portfolio investors seeking to take
advantage of double digit interest rates on Nigeria’s fixed income
instruments, namely treasury bills and FGN bonds, to maximise returns on
their investment.
According to FSDH Merchant Bank, “The rise in the external
reserves was driven by the significant rise in Foreign Portfolio
Investors, FPI, in March and increase in crude oil price. We believe the
increase in FPI was as a result of foreign investors’ interest in the
Nigerian fixed income market on account of attractive yield and
relatively stable exchange rate.”
Financial Vanguard analysis showed that dollar injection by foreign
portfolio investors, FPIs, spiked by 363 percent to $7.54 billion
dollars in the first quarter of the year, Q1’19 from $1.63 billion in
the previous quarter, Q4’18. The highest dollar injection of $4.47
billion by foreign portfolio investors was recorded in March, up by154
percent from $1.75 billion in February. Meanwhile activities in the
Investors and Exporters, I&E, foreign exchange window indicate that
dollar injection from FPIs is still high though lower than the level
recorded in March.
Data from FMDQ showed that $2.1 billion have been traded in the
window in the first two weeks of April. This translates to weekly
average of $1.05 billion so far in April, down from weekly average of
$2.3 billion in March.
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