Story by Kayode Tokede
Despite the Central Bank of Nigeria (CBN) intervention in the foreign exchange market, the external reserves have hit nine months nine to $45.12billion, Nigerian NewsDirect can report.
This, means that the external reserves in five months of 2019 have appreciated by $2 billion or 4.65 per cent.
The foreign exchange buffer that opened the year at $43.12 billion closed May 31, 2019 at $45.12 billion, our correspondent can report.
The reported $45.12 billion by CBN is the highest this year. The apex bank had attributed to increase in external reserves the hike in global oil prices, inflow from foreign countries most especially China, among others.
According to Organization of Petroleum Exporting Countries (OPEC), oil price between January and May has increased by 23per cent or $12.02 to $64.15 from $52.14 it opened this year.
The OPEC 14 basket price revealed that, oil price reached peak of $74.04 in April 24, 2019.
Monthly breakdown revealed that February reported dwindling external reserves while March reported one of the highest gain in foreign exchange buffer of the CBN.
As the external reserves closed January at $43.17billion after gaining $98.5 million, it dropped by $873.34 million in February to $42.3 billion.
However, in March, the external reserves significantly increased by $2.1 billion from $42.32 billion to $44.43 billion.
Interestingly, the significant increase was not sustained in April as the external reserves moved from $44.61 billion to $44.79 billion but it May, it gained $330.5 million to close at $45.12 billion.
A member of the CBN Monetary Policy Committee said, foreign inflow to the nation’s economy remains impressive showing strong confidence in the economy.
“Though this global macroeconomic condition poses a challenge for monetary policy in Nigeria, the prospect for higher and stable international crude oil prices, as well as, positive fundamentals attractive to foreign inflows provides a reasonable buffer,” he maintained.
The CBN Governor, Godwin Emefiele, said the introduction of the Investors & Exporters (I & E FX) window, along with improvement in domestic production of goods, helped shore up the country’s external reserves.
He said, “Transactions have reached over $48billion since the inception of the window and our foreign exchange reserves have risen to $45billion in April 2019 from $23billion in October 2016.
“Nigeria’s current stock of foreign reserves is now able to finance over nine months of current import commitments. “With improved availability of foreign exchange, the exchange rate at the I&E FX window has remained stable over the past 24 months at an average of N360/$, and the parallel market exchange rate has appreciated from N525/$ in February 2017 to N360/US$ today.”
Emefiele recalled that in October 2014, the US Federal Reserve commenced the tapering of its quantitative easing programme towards a more conventional monetary tightening cycle. He said the decision led to acute capital flow reversals, especially from emerging markets and heightened financial fragilities in the countries.
According to him, the most important of the factors to impact on the Nigerian economy was the plunge in crude oil price. He said that Nigeria’s overdependence on crude oil for over 60 per cent of fiscal revenue and over 90 per cent of foreign exchange inflows, meant that shocks in the oil market were transmitted entirely to the economy via the forex markets as manufacturers and traders who required forex for input purchases were faced with dwindling supplies.
He said, “Average monthly inflows of forex into the CBN fell from over $3.4billion in June 2014 to a low of $1.4billion in September 2016. The decline in forex earnings was further complicated by the foreign capital flow reversals due to rising yields in the USA.
The impact of these on our economy was evident in the rising pressure on the naira-dollar exchange rate.” In a bid to contain rising inflation and to cushion the impact of the drop in foreign exchange supply on the Nigerian economy, he said the monetary and fiscal authorities took extraordinary measures to tackle these extraordinary challenges.