In August 2023, Nigeria’s external reserves experienced a slight uptick of $1.87 million, thanks to the policies implemented by the Central Bank of Nigeria (CBN) aimed at stabilising the foreign exchange market.
The external reserves, as reported by the CBN, commenced the month of August at $33.95 billion and concluded at the same figure, marking a marginal increase of $1.87 million or 0.005 per cent.
Analysts have linked this increase to a combination of factors, including inflows from the diaspora and a steady rise in global oil prices.
Additionally, they point out that the news of the Nigerian National Petroleum Company Limited’s (NNPC) $3 billion ’emergency loan’ from Afrexim Bank may have contributed to further bolstering the external reserves in August.
In August alone, the CBN disclosed that export crude oil price stood at $91.8 per barrel, representing an increase of 4.34 per cent from $87.98 per barrel it closed in July.
The reported $91.80 per barrel is the highest export crude oil price since November 17, 2022 when the price was at $93.41 per barrel.
The external reserves in eight months of 2023 depreciated by $3.13 billion and it is on the backdrop of CBN interventions in the foreign exchange.
The external reserves opened in 2023 at $37.082billion and ended August 31, 2023 at $33.954billion.
With the foreign reserves at $33.95billion as of August 31, 2023, the Naira at the Investors & Exporters (I & E) Foreign Exchange market closed the month under review at N757.023 against the dollar from N757.52 against the dollar it closed the previous month.
Also, in August the local currency gained 0.07 per cent against the dollar at the I & E FX window.
The local currency at the specialised window for investors and exporters depreciated by 69per cent in eight months from N448.55 against dollar it closed 2022.
Analysts hinted that the depletion of the external reserves is due to the continuous currency intervention since the CBN still operates a floating managed peg exchange regime, external debt servicing for the second quarter (Q2) 2023 and the lower foreign exchange inflow from oil exports.
According to analysts at Codrdors Securities, “While we understand that the NNPC’s crude repayment facility with the African Export-Import bank may have been put on hold, we highlight that there have been no further positive news flows regarding other measures to stem the slide of the naira.
“The preceding, in addition to the lingering low crude oil production and foreign investors remaining on the sidelines, are expected to weigh on foreign exchange supply in the near term.
“Consequently, we expect foreign exchange liquidity constraints to linger in the short term, ensuring the local currency pressures remain intact.”
Furthermore, Analysts at Afrinvest, stated: “On the home front, the CBN foreign reserves was flattish m/m at $33.2billion, as month- end accretion of $333.0million offset outflows. Meanwhile, the official and parallel market segments traded in opposite directions amid news of NNPCL-Afrexim $3.0billion loan agreement and the publication of CBN’s outstanding financial report. At the I&E window, the base currency (USD) depreciated 0.8 per cent m/m against the Naira to close at N762.71/$1.00 as activity level rose by 27.4 per cent m/m to $2.2billion. In contrast, the parallel market rate lost 5.4 per cent m/m to N920.00/$1.00.
“At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the value of the open contract declined 11.3 per cent m/m to $5.6billion, partially due to the muted interest in the available open contracts, and on the other hand, the settlement of the $708.5million August 30, 2023 contract which matured during the month. In September, we expect the Naira to trade within a similar band across market segments as FX imbalance lingers on the back of a weak FX reserves and a sustained high demand in the parallel market.”