Foreign reserves shed $2.3bn in H1 amid rising oil price
The Central Bank of Nigeria (CBN) has disclosed that Nigeria’s foreign reserves dropped by $2.3billion in first half of 2021 despite improvements in crude oil prices.
From $35.65billion that the foreign exchange buffer opened 2021, it nosedived to $33.32billion as at June 30 indicating more pressure on the demand side of foreign exchange in Nigeria.
Figures by the apex bank show that foreign reserves dropped by $827.3million to $34.82billion in the first three months of 2021 and downtrend was sustained at accelerated pace in the second quarter of the year as it lost $1.52 billion between April and June, 2021.
It should be noted that the Nigeria’s principal source of foreign exchange earnings is from the export of crude oil.
According to Statista, crude oil price has appreciated significantly since the beginning of the year rising from an average of $49.99 per barrel in December last year to as high as $75 per barrel in June.
The country has equally received the hard currencies via other means such as non-oil exports, capital importation, foreign investment flows, service income, diaspora remittances, and other invisible items such as external borrowings and foreign aids.
Analysts have attributed the downward in the foreign reserves to the recent intervention by the apex bank amid upsurge in global crude oil prices.
They expressed further that the liquidity in the economy is contributing to the pressures in the foreign exchange market as rational economic agents flee to safer currency amid low returns on fixed income assets and rising inflation rate.
Although, at the last Monetary Policy Committee meeting, the CBN Governor, Godwin Emefiele, while speaking on the decline in external reserves, said, “This reflects sales to the foreign exchange market and third-party payments.”
In March, the reserves had lost $178 million after dropping from $34.99 billon as of the end of March 1 to $34.82 billion as of the end of March 31.
In February, the reserves dropped by $1.1billion, falling from $36.19billion as of February 1 to $35.09billion on February 26.
The CBN, in its January economic report, also said, “As a consequence of the lower foreign exchange receipts, the official external reserves declined.
“External reserves stood at $35.44 billion at end-January 2021, a decrease of 2.8 per cent and 3.5 per cent from $36.46 billion in December 2020 and $36.73 billion in January 2020.
“At that level, the external reserves position could cover 6.1 months of import for goods and services and 8.2 months of import for goods only.”
External reserves also declined from $36.6 billion in December 2020 to $34.46 billion in February 2021.