Story by Kayode Tokede
Over the escalation in United States and China trade war that is leading to dwindling global oil prices, the Central Bank of Nigeria (CBN) has disclosed that the nation’s foreign reserves dropped by $245.1million in eight days to $44.66billion as at August 8, 2019
The foreign exchange buffer at $44.66billion is lowest decline since April 2019.
Analysts have attributed the decline to dwindling in global oil price and apex bank intervention in the foreign exchange market.
At $54.28 per barrel as at Friday, the global crude oil prices hit 7-month low amid United States and China trade was escalation.
The WTI benchmark touched the lowest level in 7-month after Beijing retaliated with currency depreciation and a ban on United States agricultural imports to a threat from President Donald Trump.
The US President moved to expand tariffs to an additional $300 billion in Chinese imports – covering nearly all bilateral trade – starting September 1.
Nigerian NewsDirect can report that, the foreign reserves so far this year appreciated by 3.6per cent or $1.5 billion when it opened $43.12 billion.
Our correspondent gathered that the global oil price between January and June this has appreciated by 25.8 per cent or $13.46 to $65.60 per barrel from $52.14 per barrel it opened this year.
The exchange buffer in first quarter of 2019 gained $1.3 billion or 3.04 per cent from $43.12 billion to $44.43 billion and further increased by $641.4 million or 1.4 per cent in second quarter to $45.07billion.
The head of research, PanAfrican Capital Plc, Mr. Moses Ojo, explained to Nigerian NewsDirect that the decline in global oil prices affected the foreign reserves, adding that CBN intervention is also another contributing factor.
He noted that the foreign reserves might likely to continue on a decline as CBN continued to intervention in the foreign exchange market and drop in global oil prices.
The apex bank last week intervention in the foreign exchange market twice amid pressure in the parallel market and Investors & Exporters Foreign Exchange (I & E FX) window.
The CBN on Tuesday said, inter-bank foreign exchange market received a boost of $210 million.
Figures obtained from the CBN on Tuesday indicated that the Bank offered $100 million to authorized dealers in the wholesale sector of the market, while the Small and Medium Enterprises (SMEs) and the invisibles segments were allocated the sum of $55 million each.
On Friday, the Retail Secondary Market Intervention Sales (SMIS) received a boost of $280.04million from the CBN, which also injected the sum of CNY 28.3million in the spot and short tenored forwards segment of the inter-bank foreign market.
The Director, Corporate Communications Department, (CBN), Mr. Isaac Okorafor, were for requests in the agricultural and raw materials sectors as well as Renminbi-denominated Letters of Credit.
He further expressed satisfaction over the stability of the foreign exchange which according to him, was largely due to sustained intervention by the Bank. He reiterated assurances that the Bank’s management would remain committed to ensuring that all the sectors of the forex market continue to enjoy access to the needed foreign exchange.
The CBN governor, Mr. Godwin Emefiele recently said, “In order to reduce our reliance on the importation of items which could be produced in Nigeria, we restricted access to foreign exchange on 43 items=, while deploying our intervention funds to support growth and productivity in the agricultural and manufacturing sectors.
“These measures helped to support the attainment of our monetary policy objectives such as a reduction in the inflation rate and improved accretion to our foreign reserves.”