By Obinna Chima
Nigeria’s external reserves, which have been on the upswing since the last quarter of 2012, due to the stability enjoyed by the naira as well as reasonably high oil prices, climbed higher to close at $47 billion on Friday, THISDAY investigations have shown.
THISDAY learnt that the current value of the country’s foreign exchange reserves, derived mainly from the proceeds of crude oil sales, represented a year-to-date appreciation of $2.68 billion or six per cent, compared to $44.337 billion as at January 2.
However, the current value of the reserves is still $15 billion short of $62 billion at which the country’s reserves peaked in September 2008 before the global financial meltdown.
The naira has been relatively stable against the dollar in the past 20 months as the apex bank sells dollars at the Wholesale Dutch Auction System (WDAS) to keep the local currency around the band of +/– three per cent of N155/$1.
The naira stood at N155.74 to a dollar at the end of last Wednesday’s auction at the WDAS.
For crude oil prices, the West Texas Intermediate crude for April delivery rose 29 cents to finish at US$93.13 a barrel on Friday while the benchmark Brent crude rose 57 cents to end at US$114.10. Nigeria’s Bonny Light stood at $116.7 per barrel on Friday.
The Africa Economist/Managing Director, Economic and Market Analysis, Citibank, Mr. David Cowan, at the weekend, argued that the high portfolio inflow into the country observed since last year, was also supporting external reserves accretion.
“In the last few years that oil prices have remained high and balance of payment and current account have been in safe position, which allows the Central Bank of Nigeria (CBN) to meet foreign exchange demand.
“But remember that unlike in 2008, the rebuilding of foreign exchange reserves is not due to fundamental savings into the Excess Crude Account (ECA), it is as a result of portfolio inflows that are coming into the country.
“The huge portfolio inflow has helped in stabilising the naira,” he explained.
Cowan, however, declared that if the appreciation of crude oil prices was punctured, the naira might be hurt.
He added: “But I don’t see that happening soon. Interestingly, what you see is that the pressure on the naira has really abated and that allows the central bank to build forex reserves.
“I think the naira is going to be fine this year and early 2014. By the time we get to 2014, which is a pre-election year, the fiscal consolidation, which has been achieved, is going to come under some pressure at that time.
“I think we might see some changes in the management of the central bank which I think may stall some confidence.”
The CBN governor, Mallam Sanusi Lamido Sanusi, recently stressed the need to continue to build fiscal buffers because of what he termed “dark clouds in the horizon.”
He added: “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. We are building buffers for the economy in the event of external shocks.”