Foreign reserves fell by $2.27bn in 7 months
By Kayode Tokede
Nigeria’s foreign reserves fell by $2.27billion in seven months, from January 4 to July 29, as the figures continued to witness historic depletion.
According to data sourced from the Central Bank of Nigeria (CBN), the gross reserves have dropped to approximately $33.38 billion on July 29 against the $35.65 billion balance as of January 4, 2021.
Analysts have blamed dwindling foreign reserves to CBN intervention in the foreign exchange market.
Month-on-month performance in July showed that, the gross foreign reserves have gained $101.4million from $33.28billion to $33.38billion as at July 2021, attributable to steady increase in global oil prices as Foreign Direct Investment into the country suffer dropped in second quarter of 2021.
According to Organization of Petroleum Exporting Countries (OPEC), the price of 13 crudes reached $70 per barrel.
The dwindling foreign reserves, analysts warned, could leave the country’s battled economic outlook worse off as the confidence of foreign investors is partly influenced by the size of the reserve.
An investment expert and economist, David Adonri warned that Nigeria, like every other import-dependent country, needed a supportive foreign reserve to meet its needs.
“The value of the naira and foreign investors’ confidence in the economy is tied to the level of foreign reserve available. As it depletes, foreign investors’ confidence in the economy is being eroded.
“The main source of forex inflow is earnings from crude oil export held by CBN in foreign reserves supported by diaspora remittances and export proceeds. As the major provider of forex in the economy, CBN can determine the value of the naira and influence imports. With the depletion of the foreign reserve, that power is diminished considerably.”
A member of the CBN’s Monetary Policy Committee (MPC), Folashodun Shonubi had expressed that, “Despite being challenged by low foreign exchange revenue from exports and reduced capital flows, marginal overall balance of payments surplus and generally adequate foreign reserves level provided some respite in the external sector.
“Federal Government retained revenue increased slightly in April 2021, while expenditure reduced, due to decline in mainly personnel cost. Though fiscal deficit contracted, it remained above the budget benchmark.”
The MPC thus urged the Bank to maintain its collaboration with the fiscal authority to improve the investment climate towards attracting sustainable Foreign Direct Investment (FDI).
Another member of the MPC, Adenikinju Festus in his personal statement, stated that, “Exchange rate speculations are fueling depreciation of the naira in all the exchange rate windows. External reserves declined from $34.29 billion in April 2021 to $34.13 billion in May 2021.
“We also continue to experience dual deficits in the BOP. There is a need for a major boost to Government revenue to reduce the rising fiscal deficit and narrowing of fiscal space.
“The subsidy on petroleum products and the poor performance of refineries are issues that need immediate attention. The economy also needs a strong buffer to mitigate external volatility.
“As a country, our excessive dependence on oil for revenue and foreign exchange sustenance is no longer tenable in the medium and long term.
“We need to diversify the economic and revenue base of the economy to reduce our exposure to external shocks as well as prepare the economy for the global shift from fossil fuel to green economy. It should not be business as usual for our economic managers.”
