- As reserves loses grip on $40bn mark
Analysts have expressed worries over depleting external reserves of the Central Bank of Nigeria as they warn of imminent negative ripples on the economy.
Data obtained by Business Metrics on Monday showed that the reserves, has lost a total of $530 million since the year 2022 began up till February 2.
Checks by this paper revealed that the Apex Bank had $40.52 billion worth of hard currencies in its reserves as at December 31, 2021, having appreciated significantly to hit the $40 billion mark in the year.
However, the curve took to the south in January when reported supply of forex to manufacturers and commercial banks depleted the reserves by $480 million to close January lower at $40.04 billion.
The downtrend continued in February as the latest update by the CBN indicates that as at February 2, the total reserves was dangling at $39.99 billion, despite relatively good oil price in the global market.
Earlier, the country’s external reserves had jumped from $39.82 billion on October 15, 2021, to a high of $41.83 billion on October 29, on the back of Eurobond inflow and the International Monetary Fund’s Special Drawing Right.
Throughout 2021, Nigeria’s external reserves rose by $5.12 billion last year from $35.37 billion at the end of 2020, analysis of CBN data showed.
Meanwhile, Godwin Emefiele, the Governor, Central Bank of Nigeria boasted at the first Monetary Policy Committee (MPC) meeting this year, that members of the Committee acknowledged the continued improvement in the external reserves despite ongoing foreign exchange market pressures.
“The reserves stood at $40.2 billion as at December 2021,” Emefiele said gleefully.
Mixed hope and worries
The current development and surrounding economic realities create a mixed feeling of hope and worries aas experts in some quarters remain optimistic on stable oil price, while others identify domestic concerns capable of eroding the oil gains in the global market.
For instance, a former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, said a lot of money came from the diaspora by November and December and this boosted the reserves.
He however maintained that insecurity had affected investments in the country and productivity was low.
According to him, the productivity level must rise in the country before it can have a significant impact on the external reserves.
Despite the good news from the global oil market, battered production capacity in Nigeria can deny the country’s reserves to fully reflect the positives.
Already, it has been forecast that crude oil prices, which have maintained a positive rally since the start of the year to above $90 per barrel, will average $70.05 per barrel this year, to keep in line with the forecast from the Energy Information Administration (EIA). There are further expectations that by experts that global oil consumption will increase by 3.6 million barrels daily with supply surging by 5.3 million barrels a day.
Unfortunately, Nigeria’s oil production capacity remains a constraint to the country’s ability to reap the benefits of current levels of oil prices.
For instance, OPEC data obtained from secondary sources show Nigeria’s oil output, excluding condensates, at 1.42 million barrels daily in November last year.
FBNQuest Capital Research analysts identify Nigeria’s oil production capacity to remain a constraint to its ability to reap the benefits of current levels of oil prices. For instance, they refer to the low production of 1.42 million barrels per day last November, and referring to concerns already raised by the International Monetary Fund (IMF), they note: “We see increased attrition on the official reserves this year, more so if oil prices decline as a result of increased supply, or the pandemic.”
