External Reserves Records First Decline in Five Months

16 Jan 2013

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Ngozi Okonjo Iweala, Finance Minister

Eromosele Abiodun

Nigeria’s external reserves, which have risen steadily since last year due to high oil prices and stability in the foreign exchange market, witnessed a decline in December 2012- the first decline since July  2012.

THISDAY findings revealed that official reserves, which reached $44.467 billion as at the November 30, 2012, retreated to $44.178 by the December 31, 2012.

It therefore means that the official reserves decreased last month by $300 million (N47.3 billion), their first decline since July 2012 (in the last five months).

THISDAY findings also revealed that this was the fourth successive year in which reserves had declined in the final month of the year despite the seasonal fall off in merchandise imports in the immediate run-up to the holiday season.

In their opinion, experts at FBN Capital noted that the depreciation could be as a result of the concentration of foreign currency expenditure by the Federal Government of Nigeria.

The experts described the decline as a ‘one-off’ and hailed the Central Bank of Nigeria (CBN) foreign-exchange policy as a success.

“Reserves rose by $8 billion between end-July and end-November, and the currency has appreciated. The reasons were the hike in the cash reserve ratio for banks by the Monetary Policy Committee (MPC), and the CBN’s ruling that dealers could no longer simultaneously bid at the Wholesale Dutch Auction System (WDAS) and draw on its lending windows.

“Sales in the WDAS amounted to $990 million in December, compared with $1.03 billion the previous month. This easing of demand can also be explained by the healthy supply of forex to the interbank market by offshore investors in naira-denominated debt. Official reserves include the balance in the excess crude account (ECA), from which there may have been disbursements in December,” they stated.

The Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, had while delivering a keynote address at the 46th Annual Bankers’ Dinner held in Lagos, stressed the need for the nation to continue building the fiscal buffers.

“We need to go into a period of strong and serious fiscal restraints and consolidation. We must continue to build up external reserves and protect the economy from external shocks and focus on the strength and resilience of the banking system, “he said.

Tags: Business, Nigeria, Featured, External, Records, Five Months

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