THE Central Bank of Nigeria (CBN) has disclosed that the external reserves added 0.3 per cent or $57.42 million to $43.17billion in January despite its weekly interventions gulping huge sums of hard currency.
CBN’s external reserves data obtained by our correspondent on its official website showed that the foreign exchange buffer opened 2019 at $43.11billion but closed at $43.17 billion ends of January.
At the first 2019 Monetary Policy Committee (MPC) meeting, the CBN Governor, Mr Godwin Emefiele, had noted that the moderate improvements would further strengthen investor confidence in the wobbly economy.
“The MPC, however, remains optimistic of the gradual reversal of the current trend in the medium term, given the current stability in the foreign exchange market and the external reserves position, as well as continued improvements in key macroeconomic indicators,” Emefiele had stated.
The slight improvement in the foreign reserves is not uncomfortable with improvement in oil earning accretions after prices at the international market appreciated following supply cut deal among Organization of Petroleum Exporting Countries (OPEC).
Oil price at OPEC was hovering around $60 a barrel in January despite its volatility as price remain depressed due to lower demand and a supply glut.
The CBN in its economic report for fourth quarter 2018 disclosed that gross external reserves was $42.54 billion at end December 2018.
“This indicated a decline of 0.2 per cent below the level in the third quarter of 2018. The external reserves position would cover 6.3 months of import of goods and services or 10.1 months of import of goods only, based on the estimated value of import for the fourth quarter of 2018.
A breakdown of the official external reserves by ownership showed that CBN reserves stood at $35.27 billion (82.9 per cent), Federal Government reserves, $6.79 billion (16.0 per cent) and the Federation reserves, $0.48 billion (1.1 per cent).”
The nation’s foreign reserves opened 2018 year at $38.76 billion and closed January at $40.69 billion.
The following Month, the foreign reserves hit $41 billion on February 23 and finally closed the second month in 2018 at $42.49 billion.
However, in the first quarter of 2018, the foreign exchange buffer of the CBN rose by $7.49 billion when the foreign reserves crossed the $46 billion mark to $46.26 billion on March 29, 2018.
In April, the foreign reserves rose by $986million or 2.1 per cent to $47.49 from $46.51billion it opened. Interestedly, the foreign reserves were hovering around at $47.7 billion and $47.6 billion in May.
According to the CBN, the foreign reserves remained flat at $47 billion in June.
Findings by our correspondent revealed that the foreign reserves in half year of 2018 added $9 billion from $38.7 billion it had opened the year to $47.8billion as of June 29, 2018.
Before now, the CBN governor had predicted that the nation’s foreign reserves would soon hit $50 billion marks.
According to him, “Foreign exchange reserves have recovered significantly from a low of just over $23 billion in October 2016 to about $47.37 billion as at April 5, 2018. Foreign exchange reserves will continue to grow. Following recent accretion, foreign exchange reserves may be about $50 billion sometime later this year.”
Head of Banking and Finance Department at the Nasarawa State University Keffi, Prof. Uche Uwaleke, had urged the CBN to sustain its demand-side management measures including the policy on 41 items. Perhaps more than ever before, complementary fiscal policies are required.
He explained that “In order to halt the declining external reserves, therefore, the CBN should continue to sustain its demand-side management measures including the policy on 41 items. Perhaps more than ever before, complementary fiscal policies are required.
“The government may consider the use of protectionism, the new weapon in town, to curtail imports.
“The short term solutions should also include getting wealthy non-resident Nigerians to play a role in ramping up foreign reserves. Instead of Eurobond sales, the government should issue more of Diaspora bonds, as it did in the past, provided the proceeds are tied to viable infrastructural projects.
“By and large, a sustainable approach to foreign reserve accretion remains the pursuit of what has become a no-brainer, the diversification of the export base of the economy to create multiple streams of foreign exchange.
“The government should leverage the current high price of crude oil and implement decisive policies aimed at building international reserves to support the resilience of the external sector.”
According to him, “The fast depletion of the country’s external reserves of late provides disturbing evidence that foreign investors’ concerns about Nigeria show no sign of abetting. Political uncertainty is driving up perceived economic risk which in turn is drying up capital inflows.”
