Data gathered from the Central Bank of Nigeria (CBN) showed that the forex reserves, which are derived mainly from the proceeds of crude oil earnings, had depreciated by 2.95 per cent in the last one month, compared to the $46.467 billion it stood on September 11.
The uninspiring performance of the reserves, according to findings, was as a result of the pressure faced by the naira; especially in the third quarter of the year, as well the decline in government’s revenues.
Save for some measures adopted by the CBN in the forex market, the naira had been volatile, especially at the interbank, Bureau De Change (BDC) and parallel segments of the forex market. In addition, the central bank has continued to defend the nation’s currency at the official market with the forex reserves.
The naira closed at N160.20/$1 at the interbank market on Monday; N162/$1 at the BDC, it stood at N163/$1 at the parallel market segment.
On the other hand, the 2013 budget of the federal government was based on the assumption of N160/$1 exchange rate, an oil production of 2.53 million barrels per day, benchmark oil price of $79 a barrel and a projected Gross Domestic Product (GDP) growth rate of 6.5 per cent.
However, government revenues have continued to face significant pressure due to the decline in oil production caused by the combined effects of oil theft and pipeline shutdown due to the burgeoning illegal trade.
The BGL Securities in its latest economic report also identified oil theft, pipeline vandalism and technical hitches as the albatross to Nigeria’s foreign reserve build up as well as the Excess Crude Account (ECA)/Sovereign Wealth Funds (SWF) savings. This, it pointed out, may affect fiscal sustainability.
It argued that: “The country is currently experiencing the worst oil production disruptions in four years with output falling to pre-amnesty programme levels.”
According to statistics by the International Energy Agency (IEA), Nigeria’s oil output slowed to as low as 1.88 million barrels per day in June this year, before increasing slightly to 1.92 million barrels per day in July.
“The disruption in oil production explains the reason why the increasing global crude oil price to five-month high of $111 per barrel has not had the expected impact on government revenue, its savings and accretion to the foreign reserves.
“Unfortunately, the 2013 Appropriation Act was based on an oil production benchmark of 2.5 million barrels per day. The over 500mpd lost in actual oil production and its impact on government finances are glaring nine months into the year. The ECA was depleted from $9 billion in December 2012 to $5.1 billion in July 2013 in order to fund revenue gaps,” the BGL report stated
On its part, the Financial Derivatives Company Limited (FDC) in a recent report pointed out that the inertia to the external reserves accretion could be attributed to the increased usage of the reserves to support the exchange rate, as well as a decline in forex inflows from offshore investors.
Information from This Day was used in this report.