Nigeria’s external reserves which had declined to $23.896 billion in October last year has continued to rise especially as the price of crude oil at the international market sustains its northward move. Global oil price had begun to rise following the output cut agreement by Organization of Petroleum Exporting Countries (OPEC) countries.
The price of oil which had declined to around $35 per barrel has since climbed steadily to $58 per barrel. This had reflected on Nigeria’s reserves which has grown by 9.7 per cent compared to its 2016 low of $23.89 billion last year October. According to latest data released by the Central Bank of Nigeria (CBN), it showed that the 30-day moving average of the reserves as at January 5, 2017 stood at $26.218 billion.
While the current figure shows a decline of 9.5 per cent when compared to $28.978 billion which the 30-day moving average was on January 4, 2016, CBN data show that gross official reserves picked up by $1.1 billion in December on a 30-day moving average basis to $25.8 billion.
The monthly average movement has been an outflow of $270 million over the past 12 months. According to analysts at FBN Quest, the increase the previous month was on the basis of the disbursement of $600 million by the African Development Bank (AfDB) in the form of budget support. “This latest rise, and the increase of $300 million in one day on a moving average basis, constitutes a greater challenge beyond the $10 per barrel surge in the oil price since the new OPEC accord,” said the analysts.
They also noted that while the reserves may appear comfortable according to one traditional measure, “on the basis of the balance of payments for the 12 months through to end-June, they provided cover for 6.8 months’ merchandise imports and for 4.9 months when we add services.
“However, the CBN remains cautious. It has been selling just $1.5 million per day (to one bank in line with a rota) and looking to meet import demand with its periodic forward contracts since the devaluation/liberalisation in June.
“We do not see a floating exchange-rate regime anytime soon. The CBN and monetary policy committee are not in a rush to make the change, and the political leadership is not convinced of its merits. Offshore portfolio investors and other market participants will be disappointed.
“Yet we cannot identify the large autonomous foreign exchange inflows which will prove the short-term, game-changer. We stick, therefore, with our piecemeal solution in which a series of transactions over time supplies the trigger (Eurobond, balance under the AfDB facility, World Bank and Chinese support, and oil-related transactions).”
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