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External reserves recover marginally as crude oil prices rise, CBN targets N200/$ parallel market rate

By on February 28, 2016

Nigeria’s external reserves which had been on a steady decline, rose marginally week-on-week to $27.808 billion as at Wednesday, compared with the $27.790 billion it attained the previous Wednesday, according to the latest figures from the Central Bank of Nigeria (CBN).

This followed an increase in international crude oil prices which yesterday hit highs not seen in four weeks, as a positive economic report offset continuing concerns about a global supply glut.
The price of West Texas Intermediate crude oil, the US benchmark, rose to $34.13, while the price of Brent crude, the global benchmark, rose to $36.62.

However, oil analysts argued that the global glut of oil was more than enough to absorb increased demand, likely leading to a prolonged period of low prices.
But commenting on Nigeria’s external reserves position, CSL Stockbrokers Limited, in a report noted that what was more interesting is that the level of reserves in terms of goods import cover had been steady if not rising gradually over recent months.

This, the firm attributed to the fact that imports had been contracting, revealing that the 12-month moving average of goods imports in the country is presently at 5-year low.
“The steadiness of import cover is not a positive sign as the decline in imports is reflective of the economic slowdown. From a balance of payments perspective however, the fact that the reserves/import ratio is not falling perhaps provides some indication of why a genuine balance of payments crisis has not forced the Central Bank of Nigeria to abandon its commitment to keeping the currency at N200/$1 on the interbank market,” they added.

Meanwhile, the CBN has assured Nigerians that it would continue to implement policies that would lead to the convergence of the official and parallel markets exchange rates.
This is just as the naira appreciated to N310 to a dollar on the parallel market yesterday; up from the N330 to a dollar it had closed on Thursday.
According to a top source in the central bank, “The aim of CBN is to ensure that the divergence between the official and parallel rate does not exceed N3, so we are looking at a parallel market rate of N200/$ because the downward trend in the pressure on the naira will be sustained.”
The CBN recently put the value of its development finance interventions, aimed at boosting domestic production across the country at about N1.36 trillion.

CBN Governor, Mr. Godwin Emefiele had emphasised that the central bank’s determination to improve lending to the real sector of the economy would stimulate employment generation and boost accretion to foreign reserves through non-oil exports. A breakdown of  these disbursements had shown that N300 billion had been set aside for Real Sector Support Facility (RSSF); N220 billion had also been disbursed for the Micro-Small and Medium Enterprises Development Fund (MSMEDF); the  Nigeria Incentive Based Risk Sharing System for Agricultural Lending (NIRSAL) got N75 billion; and the Nigeria Electricity Market Stabilization Fund received N213 billion.
Similarly, the Nigeria Export-Import Bank (NEXIM) support at N50 billion for the Export Refinancing and Restructuring Facility; and the Non-oil Export Stimulation Facility that received N500 billion.

 

[ThisDay]