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External reserves drop by $3.4bn in three months

By on February 21, 2014

The nation’s external reserves have dropped by $3.4bn in the last 12 weeks, according to the latest data from the Central Bank of Nigeria.

Statistics on the CBN website showed the reserves crashed from $44.8bn on November 18 to $41.4bn on February 18, indicating an over seven per cent drop within the period.

According to the CBN data, the reserves fell from $44.8bn on November 18 to $43.6bn on December 31, before tumbling to $42.7bn on February 3.

As of February 18, which showed the latest data on the CBN website, the reserves were $41.4bn.

The reserves had in May last year peaked at $48bn, before plunging to $43bn in December.

Last year, in a bid to defend the naira from devaluation, the CBN sold about $26.6bn from the reserves to foreign exchange dealers at the foreign exchange auction market.

In 2012, the Minister of Finance, Mrs. Ngozi Okonjo-Iweala, set a target of $50bn for the reserves. But the reserves closed the year with about $44bn, finishing $6bn below the target.

Last week, the Governor, CBN, Mr. Lamido Sanusi, emphasised the need to build up the external reserves in order to protect the economy against external shocks.

Out of the over $42bn in the reserves, Sanusi had noted that about $20bn represented portfolio investment, which could flow out of the country at any given time in case of shocks.

He lamented how the Excess Crude Account had collapsed from $11.5bn to $2.5bn within one year.

According to Sanusi, the country needs to plug all leakages in its oil revenue system to enable it to build the reserves and defend the exchange rate effectively.

He had said, “You look at how some emerging markets’ currencies are falling. This stability we have built for five years can unravel overnight. We cannot take this stability for granted. It is very fragile and the way to keep it is to put in those controls: stop the theft; stop the leakages; build the reserves and then we can have lower interest rates and low inflation. We have to attack the root of the problem.”

 

 

[Punch]