Nigeria’s External Reserves Soar By $554.7m In July

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The Central Bank of Nigeria (CBN) has disclosed that foreign reserves appreciated by $554.7 million or 1.8 per cent in July, to bring the year till date growth to 19.3 per cent.

The foreign reserves closed July at $30.8 billion from $30.29 billion it opened the month under review.

The $30.8 billion foreign reserve reordered by CBN was the highest since May 12, 2017, as global oil prices stabilized and inflow from International Money Transfer Operations continued to increase.

In 2017, the foreign reserves have appreciated by estimated $5billion from $25.8 billion it opened despite CBN unrelenting intervention in the foreign exchange market.

The Nation’s foreign reserves appreciated by $4.45 billion in first three months (Q1) of 2017 amid CBN sustained pressure in bridging the gap between official foreign exchange and parallel market rates with the introduction of several foreign exchange windows.

Statistics on the CBN website revealed that the foreign exchange reserves increased by 17.2per cent to $30.29 billion on March 30, 2016 from $25.84 billion it opened this year.

Specifically, the foreign reserves for the first time in 2017 hit $30 billion on March 8, and hovering around $29 billion and $28 billion in February.

The Organization of Petroleum Exporting Countries (OPEC) price basket of 14 crudes stood at $50.04 a barrel on Monday, compared with $49.94 the previous Friday.

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Finance analysts said the steady increase in global oil prices has positively impacted on CBN’s weekly intervention and foreign reserves.

An Economic Expert, Prof. Uche Uwaleke, said recent rise in global oil price has continued to up thrust the nation’s foreign reserves.

He said, “Of recent, we have witnessed growth in global oil prices and Nigeria oil output has continued to grown to 1.8 million barrel per day. Mind you the global oil prices have grown to an average $50 per barrel. The increase in crude oil price and stability in Nigeria output continued to impact positively on the foreign reserves.

“The increase has also aid in the CBN’s weekly intervention unhindered. The Investors and Exporter Windows continued to function which has also continued to improve liquidity in the economy.”

The Joint Opec-Non-Opec Ministerial Monitoring Committee (JMMC), at its meeting recently agreed Nigeria would join the deal by capping or even cutting its output from 1.8 million barrel per day, once production stabilizes at the 1.8 million barrel per day.

The agreed cap on production will be lower than its 2.2 million barrels per day estimate for its 2017 fiscal year.

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The committee reviewed the June 2017 events as well as the first six months of the Declaration of Cooperation, and noted 98per cent compliance level of participating OPEC and Non-OPEC producing countries towards reducing excess output by 1.8 million barrels per day until the end of March 2018.

The JMMC also noted that the oil market was making consistent progress towards rebalancing amid a downward adjustment in crude oil production by 351 million barrels by participating producing countries on the one hand, and a reduction in the overhang of Organisation for Economic Co-operation and Development (OECD) commercial oil stocks by a 5-year average level of 90 million barrels to 250 million barrels during half year 2017.

This is in addition to a reported slowing down of well productivity of U.S. shale oil drillers amid accelerating cost inflation, deceleration of rig count growth and constrained access to the capital market.

However, indices in the country have been on a rebound since the government reached a truce with Niger Delta militants late 2016. Prior to the truce, the Nigerian economy has been in a tailspin since the fall in the price of crude oil in July 2014.

From an external reserve of about $40 billion in January 2014, external reserves crashed to $34 billion by December 2014, triggering a first round of devaluation of the Naira. Foreign investors also began exiting Nigeria’s capital market instigating a stock market sell-off that drove equities to multi-year lows.

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By the end of second quarter of 2016, the external reserves had dipped to as low as $25 billion while the Naira was officially depreciated to N305 from N197 at the start of the year. The economy was also officially pronounced to be in recession.

With a gradual but tepid rebound in oil prices and a seizure of hostility in the Nigeria Delta, Nigeria again commenced exports of crude oil, leading to an increase in government revenue. As reserves rose, the CBN introduced multiple exchange rate windows in February 2017 that helped stabilize FX price volatility and restored investor confidence.

The effect has been a resurgence of the bulls in the stock market, leading to a gain of about 40%, arguably the best stock market by returns in the world. The external reserve is a critical indicator of how viable third world economies are.

Third world economies like Nigeria, being sensitive to exchange rate volatility, rely on rising external reserves to keep their currencies stable and continue to attract foreign investments.

Contribution By : Kayode Tokede

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