Foreign reserves dip to $42.76bn – CBN

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Story by Kayode Tokede

The Central Bank of Nigeria (CBN) has disclosed that the nation’s foreign reserves have depreciated to $42.76 billion as at September 13, 2019.

The foreign reserves, which rose to a high of $45.18billion on June 10, 2019 from $43.17billion on January 1, dropped to $42.76billion on September 13.

The reserves dipped by $850million in 12 days from $43.61billion on August 30.

The CBN receives foreign exchange inflows from crude oil sales and other sources of revenue on behalf of the Federal Government.

Analysts at InvestmentOne Research noted that, “following the trade dispute between China and U.S., concerns about global growth and demand for oil has risen.

“This has put a downward pressure on oil prices with Brent crude price going as low as $56.23/bbl in August 2019, from $/74.57bbl in April 2019.

“Price of oil in 2019 has been, on the average, lower than price in 2018 and this may have led to the slow momentum in FX reserve accretion.

“Furthermore, as a result of risk off sentiments as analysts predict that a recession may be lurking, foreign portfolio investors inflow into the Investors & Exporters Foreign Exchange (I& EFX) window declined over the last month further limiting the accretion to reserves.

“In addition, FPI playing in the economy may have exited with their funds, as some investors seek to protect funds in safe havens, thereby putting downward pressure on foreign reserves.

“We also draw attention to the payment of coupons on Nigeria sovereign bonds which could have also put downward pressures on foreign reserves.

“Nonetheless, going forward, we believe this level of reserves is adequate for the CBN to defend the currency from global pressures in the near term.”

The Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Bismarck Rewane, had predicted in a recent presentation that the external reserves would fall to $42bn this month owing to lower oil price.

“The price of oil in August was below $60 per barrel and the external reserves are sliding towards $43bn. The last thing Nigeria needs at this time is any threat to its hard-earned reserves, especially with the P&ID judgement of $9.6bn against the country,” he said earlier in the month.

According to him, the possibility of Nigeria facing a fiscal shock is high, if oil prices slide below $55 per barrel.

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