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External reserves drops by $1.2b in one month

By on July 13, 2013

Latest data by the Central Bank of Nigeria (CBN) shows that the nation’s external reserves pool continued to decline, amidst continued defence of the Naira in the face of declining supply of foreign exchange by autonomous sources, just as there is a slowdown in oil revenue.

According to the CBN on its website, Nigeria’s external reserves fell slightly to $47.296 billion as of July 9, from $47.377 billion on the previous day, representing a decline of about $1.159 billion in the corresponding period of June.

The latest figure shows that the reserves level has fallen below the $47.88 billion it stood at the end of March 2013, when it was still on the upward swing, touching the $48 billion market on March 11, when it rose to $48.104 billion.

It thereafter peaked at $48.853 billion on April 30, before beginning a gradual descent.

Commenting on the nation’s weakening foreign reserves a fortnight ago, analysts at Lagos-based investment banking group, FBN Capital Limited, blamed the drop on the “several pressure points (that) have developed in the Nigerian economy in recent weeks.”

These, the analysts noted in “Good morning Nigeria” a daily commentary on finance and economic issues, have exposed the Achilles heel in the nation’s credit story, “namely its vulnerability to a sharp and sustained decline in oil revenues.

“The first is the Naira exchange rate, which the CBN has defended by stepping up its foreign exchange sales at auction and by direct intervention in the market. The second is the official reserves, which soared by $12 billion in the eight months to end-March but have since stabilised around US$48 billion.”

For Edwin Ikhinmwin, a financial analysts and former bank chief executive, the declining reserves is traceable to factors like the sliding price of Nigeria’s crude oil and increasing rate of theft and spills from which billions of Naira is lost daily.

Before April, when the reserves started growing at a limping pace, the nation’s reserves level increased by $1.806 billion or 4.08 per cent in the month of January, closing at $45.984 billion; as a result of which it jumped 32.98 per cent year-on-year from the previous January end figure. The growth rate reduced to 3.5 per cent or $1.603 billion in February when it closed at $47.38 billion, the highest in four years, after climbing by $3.206 billion or 7.25 per cent in the first two months of 2013.



[Daily Independent]