External reserves gain $694m in 2 weeks

*As CBN lifts forex market with $698.5m

Motolani Oseni, Lagos

Against apprehension that the continuous intervention in the foreign exchange market by the Central Bank of Nigeria (CBN) may be hurting the nation’s the external reserves, an investigation by The Daily Times has shown an increase of a whopping $693.704 million in just two weeks, even as $698.5 million was injected into the forex market during the same period under review.

The current statistics obtained from the apex bank revealed that the foreign reserves as at October 3, 2017, stood at$32.740 billion against the balance of $32.046 billion on October 19, representing total growth of $693.704 million in just 11 working days.

Considering the appreciating level in the first week, our correspondent observed that the reserves recorded just $274.873m, while comparing $32.321bn on September 26, 2017 with $32.046bn a week earlier before extending the gains by $418.831m in the second week to have less than $700m appreciation.

This was in spite of the CBN injection of $698.5m into the official foreign exchange market in two weeks.

In the recent time, the apex bank has continued its sustained liquidity injection to the foreign exchange market, and during the period under review, the bank had intervened thrice in the past weeks with injection of $195m barely a week ago, $308.5m on Friday, September 29, before embarking on the Independence holiday; and the initial $195m on Monday, September 25, 2017, making its intervention twice in the same week.

This move, however, is expected to further ensure liquidity and stability in the FX market. Hence, the Bank, on Tuesday, October 3, 2017, again intervened in the inter-bank Forex market to the tune of $195m.

Figures released by the bank showed that it offered the total sum of $100m to the wholesale segment, while the Small and Medium Enterprises (SMEs) segment received the sum of $50m.

The invisibles’ segment, comprising tuition fees, medical payments and Basic Travel Allowance (BTA), among others, received $45m.

Although, forex market, had, on Friday, September 29, lifted with yet $308.5m, as part of its ongoing effort to sustain liquidity and stabilise the forex market, after opening the week with a boost of $195m ahead of the last Monetary Policy Committee (MPC) decisions.

As usual, the $195m intervention was offered in three segments of the market, with the wholesale Secondary Market Intervention Sales (SMIS) of the Inter-bank Foreign Exchange market, it auctioned $100m and also intervened in the Small and Medium Enterprises (SMEs) and invisible segments, with the sum of $50m and $45m, respectively. This brings the total intervention for that week to the sum of $503.5m.

Despite all these interventions, the Nigerian external reserves have consistently been appreciating because, as at September 22, 2017, it stood at $32.16bn; indicating a total gain of $7.41bn in the last 12 months. This was according to the figure obtained from the apex bank website.

While comparing aforementioned statistics with the corresponding period, it showed the reserves stood at $24.75bn, against the $32.16bn, representing an appreciating figure of over seven billion dollars in just one year.

But as at August 28, this year, it strengthened by $361.6m within one month to record new figure of $32.16bn, thus, representing the highest balance since January 2015.

Although, the external reserves have staged a rebound since early 2017 after hitting a post- election low of about $23.6bn back in October 31, 2016 (using adjusted data); the external reserves dropped below $30bn in February, 2015, just before the 2015 General Election.

The price of Organisation of Exporting Countries (OPEC) basket of 14 crude oil countries stood at $55.62 on Friday, against $57.05 traded on Thursday; and $56.43 per barrel per day sold two weeks ago.

Consequently, between January and August, the foreign exchange buffer of the CBN appreciated by estimated $5.97bn from $25.8bn it opened this year despite the CBN’s unrelenting intervention in the foreign exchange market.

Experts had said steady increase in global oil prices continued to impact on the CBN’s foreign exchange buffer and the nation’s economy at large.

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

The increase in external reserves has continued to impact on the CBN’s weekly intervention to manufacturing sector, Small and Medium Scale Enterprises’ (SMEs’) sector, and others that leverage on the nation’s economy out of recession, data from the National Bureau of Statistics (NBS) had disclosed.

The data from NBS showed that the economy expanded by 0.55 per cent in the second quarter (Q2) of 2017, driven mainly by the performance of the oil, manufacturing, agriculture and trade sectors.

Okorafor 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.

Warning against speculations in the market, Okorafor said the CBN had put necessary checks in place to guard against the activities of speculators.

He stressed the determination of the Bank to continue its forex intervention and encouraged genuine users of foreign exchange to approach their banks, as the banks had enough forex to meet their needs.