External reserves drop to $47bn

The nation’s external reserves have dropped to $47bn, after being stagnant at $48bn for over three months.
Data obtained from the Central Bank of Nigeria’s website on Wednesday showed that the reserves dropped to $47.6bn on Tuesday. The reserves, which hit the $48bn mark on March 11, 2013, had since then remained stagnant within the mark.



Specifically, the latest CBN data showed that the reserves dropped from $48.0bn on June 28, 2013, to $47.6bn on July 2, 2013.

The $47.7bn reserves represent about 30.5 per cent increase over the $36.6bn recorded on July 2, 2012.

The nation’s external reserves had risen steadily since last year due to high oil prices and stability in the foreign exchange market.

It was gathered that the performance of the reserves was driven mainly by proceeds from crude oil, gas exports and crude oil-related taxes as well as reduced funding of the Wholesale Dutch Auction System on the account of huge inflow of foreign portfolio investments.

The Federal Government had targeted $50bn mark by the end of 2012.

The reserves however closed the year at $44.26bn on December 24, 2012, finishing $6bn below the government’s target.

The Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, said in May 2013 that the outlook for the country’s foreign reserves this year was mixed.

Sanusi told Bloomberg that the foreign-currency reserves would probably keep expanding while facing risks from lower-than- projected oil output and falling prices.

He said, “Quantitative easing by central banks in the United States, the United Kingdom and Japan all point to a likelihood of strong capital flows to emerging and frontier markets that may benefit Nigeria. Still, the combination of lower global oil prices and weak output performance in Nigeria may lead to a slowdown.”

Oil production in Nigeria fell to 1.81 million barrels a day in March, the lowest level since September 2009.

According to the CBN, Nigeria relies on crude exports for about 80 per cent of government revenue and more than 90 per cent of foreign income.

Sanusi said, “We always said that the budget based on projections of about 2.5 million barrels per day was founded on overly optimistic and unrealistic assumptions.”

The National Bureau of Statistics had earlier said the country’s external reserves would experience less pressure this year due to a reduction for the demand for foreign exchange to settle high import bills.

The bureau said in a report released in Abuja that the projected increase in the value of total merchandise trade was expected to generate higher external reserves through exports.

This, it hoped, would lead to a higher increase in the supply of foreign exchange than the demand.

The NBS report stated, “The recent declines in imports are expected to carry on till the third quarter of 2013.

“Beyond this point, the growth rate in imports is expected to yield positive year-on-year changes. By the fourth quarter of 2013, growth in the value of total merchandise trade will be driven by both higher imports (relative to fourth quarter 2012) as well as oil and non-oil exports.”

Minister of Finance, Dr. Ngozi Okonjo-Iweala, had stressed the need for the country to shore up its external reserves.

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