The falling prices of oil, the country’s main source of revenue, have continued to impact negatively on the external reserve as it dropped to $46.98 billion within the last three months.
The country relies on crude oil exports for about 80 per cent of government revenue and more than 90 per cent of foreign income.
According to the latest data from the Central Bank of Nigeria (CBN), the foreign reserve which had peaked at $48.85 billion on May 2 declined to $46.98 billion on August 6, representing $1.8 billion drop.
The declining state of the reserve has been a source of worry as analysts have stressed the need for government to address oil theft, pipeline vandalism, smuggling and recourse to the reserve to protect the naira. This is against the backdrop that the performance of the reserve is driven largely by proceeds from crude oil, gas exports and crude oil-related taxes as well as reduced funding of the Wholesale Dutch Auction System (WDAS) on the account of huge inflow of foreign portfolio investments.
At the July meeting of the Monetary Policy Committee (MPC), the CBN expressed strong concerns about the risks posed to government revenues from oil theft, less than expected production, new discoveries of shale oil, the fast increasing number of African oil exporters, the dwindling market for the nation’s crude, the inevitability of a fall in global oil prices as well as capital flow reversal, which it said might impact on the current global (dollar) carry trade, for which the country has been a major beneficiary.
The committee noted the increase in external reserves to $47.99 billion as at July 18, 2013 from $43.83 billion at end-December, 2012, representing a rise of $4.16 billion or 9.49 per cent year-to-date, stating that the level of reserves provided cover for approximately 11 months of import.
The foreign reserves had hovered between $47 billion and $48 billion marks since February 20, 2013, when the nation recorded 46.96 billion.
Between February 21 and July 15, the external reserves hovered between the $47 and $48 billion. On July 16, the external reserves dropped to $46.99 billion. The country’s foreign reserves had fallen by 2.78 per cent month-on-month to $47.11billion on July 11.
The CBN Governor, Mallam Sanusi Lamido Sanusi, said in May that the outlook for the country’s foreign reserves this year was mixed.
According to him, the foreign-currency reserves would probably keep expanding, while facing risks from lower-than-projected oil output and falling prices.
He averred that quantitative easing by central banks in the United States, United Kingdom and Japan point to a likelihood of strong capital flows to emerging and frontier markets that might benefit Nigeria, adding that the combination of lower global oil prices and weak output performance in Nigeria might lead to a slowdown.
Falling oil Price shrinks Nigeria reserve
The falling prices of oil, the country’s main source of revenue, have continued to impact negatively on the external reserve as it dropped to $46.98 billion within the last three months.
The country relies on crude oil exports for about 80 per cent of government revenue and more than 90 per cent of foreign income.
According to the latest data from the Central Bank of Nigeria (CBN), the foreign reserve which had peaked at $48.85 billion on May 2 declined to $46.98 billion on August 6, representing $1.8 billion drop.
The declining state of the reserve has been a source of worry as analysts have stressed the need for government to address oil theft, pipeline vandalism, smuggling and recourse to the reserve to protect the naira. This is against the backdrop that the performance of the reserve is driven largely by proceeds from crude oil, gas exports and crude oil-related taxes as well as reduced funding of the Wholesale Dutch Auction System (WDAS) on the account of huge inflow of foreign portfolio investments.
At the July meeting of the Monetary Policy Committee (MPC), the CBN expressed strong concerns about the risks posed to government revenues from oil theft, less than expected production, new discoveries of shale oil, the fast increasing number of African oil exporters, the dwindling market for the nation’s crude, the inevitability of a fall in global oil prices as well as capital flow reversal, which it said might impact on the current global (dollar) carry trade, for which the country has been a major beneficiary.
The committee noted the increase in external reserves to $47.99 billion as at July 18, 2013 from $43.83 billion at end-December, 2012, representing a rise of $4.16 billion or 9.49 per cent year-to-date, stating that the level of reserves provided cover for approximately 11 months of import.
The foreign reserves had hovered between $47 billion and $48 billion marks since February 20, 2013, when the nation recorded 46.96 billion.
Between February 21 and July 15, the external reserves hovered between the $47 and $48 billion. On July 16, the external reserves dropped to $46.99 billion. The country’s foreign reserves had fallen by 2.78 per cent month-on-month to $47.11billion on July 11.
The CBN Governor, Mallam Sanusi Lamido Sanusi, said in May that the outlook for the country’s foreign reserves this year was mixed.
According to him, the foreign-currency reserves would probably keep expanding, while facing risks from lower-than-projected oil output and falling prices.
He averred that quantitative easing by central banks in the United States, United Kingdom and Japan point to a likelihood of strong capital flows to emerging and frontier markets that might benefit Nigeria, adding that the combination of lower global oil prices and weak output performance in Nigeria might lead to a slowdown.
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