External reserves gain $12.9bn in 1 year despite FX intervention

…Nigeria’s reserves rise to $38.73bn
…Inflow from Diaspora remittances contributes to forex reserves
As 2017 winds down giving way to 2018, Nigeria’s external reserves have recorded total gain of nearly 50 per cent or $12.9 billion in one year, despite continuous interventions by the Central Bank of Nigeria (CBN) in recent times to support the local currency, findings by The Daily Times revealed.

The external reserves, which was seen at $25.8bn as at the beginning January 2017, grew to $38.73 billion as of December 28, 2017, which represented the latest figure of the external reserves.

Many financial experts believe that this development is renewing confidence that the 2018 forex reserves target of the CBN put at $40bn is achievable, as the apex bank steps up its management of forex earnings.

But it is worthy of note that steady increase in the global oil prices had contributed to the appreciation recorded in the nation’s foreign reserves, as Eurobond lending had positively impacted the foreign exchange buffer of the apex bank.

In November 2017, the Federal Government raised total sum of $3bn through Eurobonds, which was oversubscribed by about $11bn and split across 10-year and 30-year tranches at issuance yield of 6.5 per cent and 7.625 per cent, respectively.

Also, increased inflow from Diaspora remittances was also said to have contributed immensely to the Africa’s largest economy forex reserves.

The breakdown of the latest figure showed that the reserves in just one month gained total sum of $3, 785,413,314bn, between November 30, 2017 closing figure of $34, 945,550,023bn and December 28, 2017 balance figure of $38,730,963,337bn.

The CBN’s latest statistic showed that a week earlier, as of December 22, the Nigeria’s forex reserves stood at $37.92bn, which represented 10.1 per cent from a month earlier.

But it stood at $34.53bn as of November 24, up nearly 3 per cent from a month earlier, with a balance of $33.58 billion at the same date in October, which represented 40.5 per cent, while compared to the balance in the corresponding period in 2016.

Our further checks, however, revealed that the nation’s external reserves under the supervision of the CBN recorded a whopping $8bn between January and October of the year under review.

The figure showed that during the 10 months considered, the external reserves increased by 30.9 per cent; with an opening figure $25.84bn before closing at $33.83bn on October 31, 2017.

Although, there have being steady increase in global oil prices and increased activity in the Investor and Exporter FX window.

For instance, the price of Organisation of Exporting Countries (OPEC) basket of 14 crude countries gained 9.9 per cent to $58.57 per barrel as at October 31, 2017 from 53.3 it started trading early 2017.

Global Oil prices continued to rally around $60 per barrel extended to new heights on Friday with Brent crude climbing to a level last seen in mid-2015, stoking hopes in the industry that the market has finally turned a corner following a three-year slump.

An oil price recovery has been under way since June as crude demand finally started to outpace supply, with Brent rallying by almost 40 per cent to $61 a barrel, as the global oil glut that had built up over the previous three years started to draw down.

With Foreign reserves at $33.83bn, it has reached a two-half year high this year in the midst of foreign exchange intervention put in place to the various exchange markets by the CBN.

For the third quarter of 2017, the external reserves gained $7.53bn or 29.2 per cent from $25.8bn it opened January to $33.33bn, the highest in almost three years.

The CBN spokesman, Mr. Isaac Okorafor, had noted the increase in foreign reserves can be attributable to peace in the oil-rich Niger-Delta region of the country, which resulted into increased oil output and earnings.

He had said with the sustained interventions, the apex bank has been able to push foreign exchange demand away from the parallel market into the formal regulated market.

In the second quarter, the oil sector grew significantly by 17.04 percentage points from -15.40 per cent recorded in Q1 2017 to 1.64 per cent, reflecting the relative peace in the Niger Delta, increased oil output from the region and increase in oil prices.

The nation’s economy recently exited from recession with data from the National Bureau of Statistics (NBS) showing that the Gross Domestic Product (GDP) expanded by 0.55 per cent in the second quarter (Q2) of 2017.

The growth in GDP was driven mainly by the performance of the oil & gas and three other sectors.

Between January and September 2017, the foreign reserves gained $7.53bn or 29.2 per cent from $25.8bn it opened January to $33.33bn- that was the highest in almost three years.

Between January and August, the foreign exchange buffer of CBN has appreciated by estimated $5.97bn from $25.8bn it opened this year.

Statistics on the CBN website revealed that the external reserves increased by 17.2per cent to $30.29bn on March 30, 2016 from $25.84bn it opened this year.

Specifically, the external reserves for the first time in 2017 hit $30bn on March 8, and hovering around $29bn and $28bn in February.

OPEC price basket of 14 crudes had closed at $50.04 a barrel in March.

The Federal Government 2017 budget was based on the production of 2.2 million barrels per day at the reference price of $42.5 per barrel in the global market, a benchmark the executive used in preparing the budget.

Finance experts had said steady increase in global oil prices continued to impact on CBN’s foreign exchange buffer and the nation’s economy in general.

Commenting on the development, Cowry Asset Managers said: “We retained our favourable outlook for the exchange rate amid sustained stability in global crude oil prices which should result in further build-up in foreign reserves as well as CBN’s continued intervention in the various segments of the interbank foreign exchange markets”.

Meanwhile, the total currency in circulation as at end of October 2017 increased to N1.79trn against recorded figure of N1.78trn in September.

The figure, based on month-on-month (m-o-m), grew by 0.6 per cent, even though the Nigerian currency in circulation was estimated at N1.86trn in August 2017, 5.6 per cent increase over N1.76trn it had reported in July.

The currency in circulation, which is the physical money used for transactions between consumers and businesses, had opened 2017 at N1.99trn and closed in February at N1.97trn, both retaining highest currency in circulation.

However, the apex bank’s total assets hits N22trn, a 2.3 per cent m-o-m increase over N21.6trn in prior month while total deposits rose by 4.6 per cent to N18.1trn from N17.3trn in August.

The depository corporations’ survey for September thus showed a 0.47per cent m-o-m increase in Broad Money to N21.95trn in September – as Net Foreign Assets (NFA) increased m-o-m by 3.26per cent to N10.05trn, thus offsetting a m-o-m 1.77per cent fall in Net Domestic Assets (NDA) to N11.90trn.

Motolani Oseni, Lagos