Nigeria’s external reserves rose to a 12-month high of $28.58 billion as at February 7, 2017, according to latest data by the Central Bank of Nigeria (CBN).
Around February 2016, the nation’s foreign reserve was hovering between $28 billion and $27 billion, investigation conducted NationalJournal online.
This is just as the gap between the interbank market and parallel market end of the foreign exchange market continued to widen.
The latest update from the Central Bank of Nigeria (CBN) is coming against the backdrop of steady increase in global crude oil, a factor that had stoked the upswing in reserves in the past one month.
Organization of Petroleum Exporting Countries (OPEC) reference basket price moderated lower by 0.98 per cent to $52.78 per barrel as at February 7, 2017 from $53.30 it opened this year.
The country’s external reserves rose by 8.4 per cent to $28.51 billion by February 06, 2017, from $26.29 billion a month ago, climbing to their highest level in 10 months, the data published on the CBN website indicated.
The apex banking regulatory body did not provide any reason for the recent rise, which may be attributed to the recent rise in global oil prices.
Foreign Exchange Reserves in Nigeria has gained $2.7 billion or 10.6 per cent in 2017 to $28.58 billion from $25.84 billion in December of 2016.
The foreign exchange had fallen by $3.2 billion or 10 per cent in 2016 from $29 billion to $25.8 billion.
Meanwhile, a group of experts at GTI Securities Limited has said, “as indicated in earlier Exchange Rate analysis, the external reserves was weak all through 2016 and greatly limited the CBN’s ability to support price stability.
“The weak oil receipts in the course of the year resulted in depletion of the reserves account which eventually hit a 15-year low of $23.89billion in October 19th. The account has since recorded marginal accretion as inflow from International Money Transfer Operations (IMTO) on trade proceeds has helped to boost upside.
”The marginal increase in oil production after the government and Niger-Delta Avengers entered into truce equally contributed to recent rally on the reserves.”
They explained that the output cut agreement reached by OPEC members in late year November and the OPEC and non-OPEC members deal in December is expected to provide boost to the foreign reserves going forward and thereby supporting the fiscal and monetary policies makers in steering the economy out of current recession.
According to GTI Securities 2017 economy outlook, “The local currency (Naira) witnessed a rough season at the foreign exchange (FX) market owing to weakness in foreign reserves account. This was fed by weak crude oil production and low price at the global market.
“Eventually, it limited the CBN’s ability to pursue her mandate of price stability. Given the structural deficiencies of the Nigerian economy, (huge import bill, and lack of proper diversification) the monetary policy authority adopted drastic short term initiatives in a bid to achieve her mandate.
“On June 20th, the CBN devalued the Naira by letting it float freely against other foreign currencies in order to provide liquidity and stabilize the foreign exchange market.
“As such, official (interbank) exchange rate was moved up by 43.04 per cent to N282.50 against the Dollar. In order to see to market driven agenda, the Bank introduced a flexible exchange rate regime in the inter-bank market; introduced a Naira-settled OTC-FMDQ-OTC trading platform, adopted two-way quote trading platform at the inter-bank foreign exchange market and appointed foreign exchange primary dealers.
“Though, this brought immediate relive to the Naira riddled with backlog of unmet Dollar demands and obligations as the CBN used futures to settle obligations, but it created a ripple effect of price level in the system
“Despite the above measures, the pressures on the Naira continued unabatedly. As at mid-October, the Naira touched a new low of N520/$ and closed on December 31st, 2016 at an average of N491/$ in the parallel market.
“At the interbank market, it closed at N305.50 on December 30th, representing 54.68per cent growth against the figure it opened the year,” the report explained.