Empirical Estimation of Optimal International Reserves for Nigeria: The Sudden Stop Model

Authors

G. K. Sanni, Central Bank of NigeriaFollow
T. S. Olusegun, Central Bank of NigeriaFollow
Z. Sani, Central Bank of NigeriaFollow

Publisher

Central Bank of Nigeria

Keywords

Optimum Reserves, Sudden Stop, Capital Flow, Foreign Currency Deposits

Abstract

The study examined the issue of optimum external reserves for Nigeria during 2010 – 2014, using Jeanne and Ranciere (2006) and Goncalves (2007) sudden stop model approach. The study showed that resident foreign currency deposit accounted for over 90 per cent of the total foreign currency deposit, while non-resident foreign currency deposit accounted for the remaining. The result of the model suggested that external reserves were adequate in 2010 but beyond that period, it was far below optimal level. On average, the optimum external reserves were around 15.7 per cent of GDP in the past four years, translating to US$54.52 billion.

Author Bio

The authors are staff of the Research Department, Central Bank of Nigeria.

Publication Title

CBN Economic and Financial Review

Issue

1

Volume

54

Recommended Citation

Sanni, G. K., Olusegun, T. S. and Sani, Z. (2016). Empirical Estimation of Optimal International Reserves for Nigeria: The Sudden Stop Model. CBN Economic and Financial Review. 54(1), 1-23.