The external reserves have remained stagnant at N48bn for over three months, an investigation by our correspondent has shown.
It was learnt on Friday that the swing in the external reserves was as a result of the volatility in crude oil prices.
The reserves, which stood at $48.47bn during the week, hit the N48bn mark on March 11, 2013. And since then, they have been up and down within the mark.
According to financial analysts, the domestic oil output has been negatively affected by several disruptions such as pipeline vandalism, bunkering and force majeure.
Financial Derivatives Company Limited, in its monthly publication, warned that a further decline in global oil prices to $90 per barrel would be devastating for the Nigerian economy, as the reverberations of the shocks would hamper any form of growth across all sectors of the economy.
FDC said, “As the value of the naira falls towards N165 to a dollar at the parallel market and the likelihood for capital flight increases, external reserves will be depleted by about $10bn to $15bn from the current level of $48.5bn. The resultant $33.5bn to $38.5bn will only cover an average of eight months of exports which may lead to increase in the country’s borrowing.”
Brent crude oil for Wednesday closed at $102.96 per barrel while the United States crude stood at $95.75 per barrel. Global oil prices had declined by six per cent from 107.23 per barrel at the end of the first quarter. Similarly, Nigeria’s bonny light crude stood at $105.5 per barrel on Wednesday, 0.96 per cent higher than $104.5 per barrel recorded last week.
Data obtained from the Central Bank of Nigeria’s website on Friday showed that the reserves recorded $2.68bn in seven weeks, from $44.34bn recorded from the beginning of the year to $47bn in February 2013.
The external reserves, which rose steadily since last year due to reasonably high oil prices and stability in the foreign exchange market, however, started dropping in April.
Contrary to the Federal Government’s plan to raise the country’s external reserves to $50bn by end of last year, the reserves closed 2012 at $44.26bn as at December 24.
Figures obtained from the CBN showed that the reserves closed the year $6bn below the Federal Government’s $50bn target.
Although the reserves rose by $11.34bn, representing a 34 per cent increase in 2012 from $32.92bn in 2011, it failed to meet the Minister of Finance, Dr. Ngozi Okonjo Iweala’s desired goal.
The minister had said in July last year that the Federal Government had set a target of $50bn external reserves by the end of 2012 from the July figure of $36.37bn.
Okonjo-Iweala, at a meeting with the Organised Private Sector in Lagos, stressed the need for the country to shore up its external reserves, saying that there was the need to build up the reserves to $50bn before December.
She pointed out that this would help the country to stand on its feet in the event of any global economic recession.
Okonjo-Iweala, who is also the Coordinating Minister of the Economy, said apart from the external reserves, Excess Crude Account balances were expected to hit $10bn before the end of the year.
The Governor, CBN, Mr. Lamido Sanusi, recently said the outlook for the country’s foreign reserves was mixed.
He said the foreign-currency reserves would probably keep expanding while facing risks from lower-than- projected oil output and falling prices.
He said, “Quantitative easing by central banks in the United States, the United Kingdom and Japan all point to a likelihood of strong capital flows to emerging and frontier markets that may benefit Nigeria. Still, the combination of lower global oil prices and weak output performance in Nigeria may lead to a slowdown.”
Oil production in Nigeria fell to 1.81 million barrels a day in March, the lowest level since September 2009.
Nigeria relies on crude exports for about 80 per cent of government revenue and more than 90 per cent of foreign income, according to the CBN.
The National Bureau of Statistics had earlier said the country’s external reserves would experience less pressure this year due to a reduction in the demand for foreign exchange to settle high import bills.
The bureau said in a report released in Abuja that the projected increase in the value of total merchandise trade was expected to generate higher external reserves through exports. This, it hoped, would lead to a higher increase in the supply of foreign exchange than the demand.
Information from Punch was used in this report.