Latest data by the Central Bank of Nigeria showed the country’s foreign reserves surged by $943.48 million week-on-week to touch $40.76 billion as at October 20.
Analysts have observed that the reserves are still reflecting the inflows from International Monetary Fund (IMF) and foreign currency borrowings by the Federal Government of Nigeria to sustain its weekly accretion.
The $3.4 billion Special Drawing Rights (SDRs) from the IMF has boosted the foreign reserves, coupled with rising prices of crude oil in the international market.
This has also been a major catalyst for Nigeria’s local currency, naira to put up some level of resistance against the green back in the recent past.
For instance, the naira was flat at N415.07 per one dollar at the I&E window (IEW) but appreciated by 0.2 per cent week-on-week to N571 against the dollar at the parallel market.
At the IEW, total turnover (as of 21st October 2021) declined by 47.6 WtD to $610.13 million, with trades consummated within the N405.00 – 444.00/USD band.
In the Forwards market, the rate was flat at the 1-month (N415.91/USD) contract, while the 3-month (+0.3 per cent to N421.10/USD), 6-month (+0.4 % to NGN429.82/USD), and 1-year (+1.0% to NGN446.28/USD) contracts reflected the per cent appreciation of the naira to the greenback.
Hope on Dangote Refinery
Meanwhile, the country is putting so much hope in the operations of Dangote Refinery to save depletion of its reserves.
Speaking at a foreign investors’ meeting held in New York, Godwin Emefiele, governor of the Central Bank of Nigeria stated that the commencement of the Dangote refinery would be a significant saver of foreign exchange for Nigeria
He noted that the importation of petroleum products comes close to about 30 per cent of the total FX Nigeria spends on imported items.
The Governor further stated that he expects the Refinery and a petrochemical plant to be launched in Mid-2022.
In their reaction, analysts at Cordros Capital Limited held that the eventual commencement of activities at the Dangote refinery could pave the way for the removal of fuel subsidy in the medium term as petroleum motor spirit (PMS) pump prices may reduce.
They anchored this expectation on savings from landing costs and crude oil sale agreement between the federal government and Dangote refinery.
Beyond this, “The subsidy removal could also support the FGN’s medium-term plan to increase the revenue to GDP ratio from 8 per cent to 15 per cent of Gross Domestics Product (GDP) by 2025,” they noted.
General, the FX market is expected to further enjoy improved liquidity in the IEW over the medium term, given expectation of increased oil receipts in line with the rise in crude oil prices and inflows from FCY borrowings of $6.18 billion and IMF $3.50 billion.
Foreign reserves gain $944m to hit $40.76 billion
