External Reserves Drop by 6% to $40.5bn in 10 Months

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Godwin Emefiele
Godwin Emefiele

Obinna Chima

Nigeria’s external reserves have reduced by $2.575 billion or six per cent to $40.5 billion as of last Thursday, compared with the $43.075 billion it was at the beginning of the year.

The development was attributed to outflows from foreign portfolio investors as well as the payment for debt services.

Analysts at FSDH Merchant Bank also stated that the holdings of Central Bank of Nigeria’s open market operations (OMO) bills have declined since July, adding that net foreign assets (NFAs) of banks have also been on the decline, with the falling trade balance.

“Declining external reserves could limit foreign investment inflows into the country as investors would be wary about stability of rates and ease of exit. Despite this concern, we expect inflows in 2019 to be higher than the $12.2 billion in 2018 as investors seek to take advantage of the relatively higher yields in the Nigerian market,” the Lagos-based firm stated in a report.

The reserves derived majorly from the proceeds of crude oil sale.

The average spot price of Nigeria’s reference crude oil, the Bonny Light at the end of August 2019, decreased to $61.05 per barrel, compared with $66.23 per barrel recorded in July 2019.

This, according to the CBN’s economic report for August 2019, represented a decline of 7.8 per cent below the level in the preceding month.

The fall in crude oil price was attributed largely to slow demand for crude oil in the global crude oil market.

However, Nigeria’s crude oil production, including condensates and natural gas liquids, stood at 1.93mbpd or 59.83 million barrels in August 2019, according to the report.

In the report for August 2019, the aforementioned estimate represented an increase of 4.3 per cent, compared with the 1.85 mbpd or 57.35 million barrels produced in the preceding month.

According to the report, crude oil export was estimated at 1.48 mbpd or 45.88 million barrels, representing an increase of 5.7 per cent, compared with 1.40 mbpd or 43.40 mb recorded in the preceding month.

The allocation of crude oil for domestic consumption was  0.45 million barrels per day or 13.95 million barrels in the month under review.