Nigeria Foreign reserves rise to $32.9b

The nation’s foreign reserves has risen to $32.98 billion. As at October 13, it netted over $2 billion in five days.

Data from the Central Bank of Nigeria’s (CBN) website showed that as at October 7, the reserves stood at $30.8b after shuttling between $31 billion and $32 billion, on September 26 and October 6.

The reserves had risen to $34.9 billion in the middle of August, before it slipped to the current level. The CBN said it is concerned with the sustained low level of the reserves in the face of higher oil output, higher oil exports volume and higher oil prices. Before this reduction, the reserves had stood at $33.73 billion as at July 21, representing an increase of $1.84 billion or 5.77 per cent over the level attained on June 30.

Given that the current oil price level may not be sustained in the event of a slowdown in global economic recovery, the CBN said there is the urgent need to pursue policies that would foster macro-economic stability, economic diversification as well as encourage foreign capital inflows.

Also, the foreign reserves equally stood at $37 billion as at July 4, last year, and were up to $68 billion in August 2008, before the global financial crises impacted negatively on it, according to the apex bank.

The Monetary Policy Committee (MPC) had at, its last meeting, noted that there are concerns about the likely impact of a double dip recession of oil prices on the already declining foreign reserves.

Second, there are also concerns about the delay in implementing fundamental economic decisions that would shore up reserves. It is estimated that simply passing the Petroleum Industry Bill (PIB) and removing subsidies on Premium Motor Spirit (PMS) will add at least US$10 billion to the reserves yearly.

According to the CBN, the petroleum subsidy for this year alone is estimated at $6 billion. A substantial part of oil production (about 40 per cent) is in deep offshore wells. Based on the terms agreed in the 1990s when oil price was under $30, royalty from oil wells deeper than 1,000 metres is zero per cent and the nation is paid only 20 per cent of the profit by oil companies after deducting their expenses. As a result, the country has had limited benefits from high oil prices and increasing output, with most of the gains going to multinational oil companies under an inequitable fiscal arrangement.