Nigerian Bank Nigeria CBN Central Bank Of Nigeria – External Reserves Climb Further, Now 34985bn Dollars

Source: Thisdayonline, Feb 15, 2011

Nigeria’s external reserves which have been on the upswing since this year extended its rally further to $34.985 billion as at February 9. Data obtained from the Central Bank of Nigeria (CBN) on Monday, has shown that the reserves improved further by $267 million; compared with the $34.718 billion it attained on February 2.

The reserves derived mainly from the proceeds of crude oil production, had recorded a total growth of $1.803 billion in the first five weeks of the year to February 2.

Financial market experts once more, attributed the accretion in the forex reserves to the steady rise in oil prices in the international market since this year as well as the moderate demand for forex at the CBN’s official forex market – the Wholesale Dutch Auction System (WDAS).

World oil prices advanced further on Monday as markets cheered over Greece’s approval of austerity measures demanded by international creditors in return for a second bailout. The Brent North Sea crude for March was up 93 cents to $118.24 in the late London deals.

In the same vein, the New York’s main contract, West Texas Intermediate (WTI) light sweet crude for delivery in March, gained $1.42 to $100.09 a barrel on the New York Mercantile Exchange on Monday.

On the other hand, the demand for dollar at the CBN’s official market has been moderate since the commencement of the fuel subsidy probe, as appetite for the greenback by oil marketers has gradually diminished. Consequently, the naira has largely traded around the band of N156.50 to a dollar.

The highest level attained by the reserves last year was the $36.48 billion it attained on March 4, while its lowest was the $31.31 billion on October 5, 2011.

The reserves had faced intense pressure, due to the high demand for forex as the liquidity management office sold dollars to support the naira amid low accretion from oil revenues due to increased government spending.

Commenting on the economic outlook in the short-run, the Financial Market Dealers Association (FMDA), pointed out in its monthly report for January 2012, that weak demand of crude oil may still persist in the near term in the Euro-zone area, adding that the price will be moderated by improved United States and Chinese economies.

“Consequently, prices may hover around the current band. From the above, oil receipt will be moderate. Consequently, domestic borrowings will continue. Inflation is likely to remain a threat, in the short term. Hence, quantitative tightening policy although at a less aggressive rate will still be pursued by the apex bank,” FMDA added.

Emerging Markets Strategist, Standard Bank Plc, Samir Gadio, had stressed that passing the Petroleum Industry Bill and tackling various leakages in the oil sector would help boost external reserves.

He had insisted that the Excess Crude Account (ECA), which is continuously monetised and shared among the three tiers of governments, prevents any tangible accumulation of the forex reserves.

Gadio had said: “Clearly, this model is not sustainable. Nigeria is already a distinct laggard in terms of fiscal savings-to-GDP ratio compared to oil producing peers and will most likely be unable to withstand an external shock should oil prices fall in the future.”

Nigerian Bank Nigeria CBN Central Bank Of Nigeria