The combination of oil revenue and trades of foreign portfolio investors (FPIs) were the drivers of the marginal accretion witnessed in the nation’s external reserves increased by N5$57.42 million in first month of the year.
Gross official reserves increased marginally in January to $43.17 billion as proceeds of the FGN’s $2.9 billion Eurobond issue in November have long been banked.
The oil price has settled around $60 per barrel and volumes have picked up due to a decline in sabotage.
Inflows from FPIs have recovered a little, and have topped the sources of forex supply at the investors’ and exporters’ window (NAFEX) for three of the four weeks this year for which the data are available.
The CBN in its economic report for fourth quarter 2018 disclosed that gross external reserves stood at $42.54 billion at end December 2018.
“This indicated a decline of 0.2 per cent below the level in the third quarter of 2018. The external reserves position would cover 6.3 months of import of goods and services or 10.1 months of import of goods only, based on the estimated value of import for the fourth quarter of 2018.
A breakdown of the official external reserves by ownership showed that CBN reserves stood at $35.27 billion (82.9 per cent), Federal Government reserves, $6.79 billion (16.0 per cent) and the Federation reserves, $0.48 billion (1.1 per cent).”
The nation’s foreign reserves opened 2018 year at $38.76 billion and closed January at $40.69 billion.
The following Month, the foreign reserves hit $41 billion on February 23 and finally closed the second month in 2018 at $42.49 billion.
However, in the first quarter of 2018, the foreign exchange buffer of the CBN rose by $7.49 billion when the foreign reserves crossed the $46 billion mark to $46.26 billion on March 29, 2018.
In April, the foreign reserves rose by $986 million or 2.1 per cent to $47.49 from $46.51billion it opened. Interestedly, the foreign reserves were hovering around at $47.7 billion and $47.6 billion in May.
According to the CBN, the foreign reserves remained flat at $47 billion in June.
Findings by our correspondent revealed that the foreign reserves in half year of 2018 added $9 billion from $38.7 billion it had opened the year to $47.8 billion as of June 29, 2018.
Before now, the CBN Governor, Godwin Emefiele, had predicted that the nation’s foreign reserves would soon hit $50 billion marks.
According to him, “Foreign exchange reserves have recovered significantly from a low of just over $23 billion in October 2016 to about $47.37 billion as at April 5, 2018. Foreign exchange reserves will continue to grow. Following recent accretion, foreign exchange reserves may be about $50 billion sometime later this year.”
Analysts at FBN Quest Capital said reserves at end-January covered more than 16 months’ merchandise imports, and nine months when we include services on the basis of the balance of payments (BoP) to June 2018. This remains a healthy buffer.
“Some definitions are required for the sake of clarity; however, the Nigerian data are gross, cover just forex and exclude swap contracts”.
Prof. Uche Uwaleke, Head of Banking and Finance Department at the Nasarawa State University Keffi, had urged the CBN to sustain its demand-side management measures including the policy on 41 items. Perhaps more than ever before, complementary fiscal policies are required.