External reserves hit $40.63bn, gain $1.9bn in one month

… as CBN targets $60bn reserves in 2019

Despite continuous injections of US Dollar into the official foreign exchange market to support the local currency, the Nigerian external reserves during the first month in 2018, has recorded a whopping gain of $1.85 billion, while compared $40.625bn stood as at end of January 30, 2018 from $38.765 bn closed on December, 29, 2017, data obtained from the Central Bank of Nigeria (CBN) website showed.

This development means that the apex bank has till the end of next year to achieve its projected $60bn external reserves, even as it currently standing at over $40.6bn, less than two months into the year.

However, a breakdown of the current external reserves figure showed that the first week in January, between Tuesday 2nd and Friday January 5th, 2018, recorded a total appreciated figure of $246.503 million to close at $39.158bn as of January 5th, 2018.

At the close of second week, the reserves had increased to $39.531bn, accounting for total gains of $193.29m, while compared with the previous week closing rate of $39.338bn.

The Nigerian foreign reserves moved to $39.720bn at end of the third week in the month, showing growth of $264.124 m higher than $193.298m declared in the previous week in January, 2018.

The Daily Times analysis, however, showed that the reserves, between Monday 22, January, 2018, extended to Tuesday 30, of the following week, accounted for the highest gains of $474.02m during the first month of 2018.

Although, our checks proved that the external reserves in 2017 recorded total gain of nearly 50 per cent or $12.9bn in just one year, between 2016 and 2017.

The external reserve, which was seen at $25.8bn as at the beginning January 2016, grew to $38.73bn as of December 28, 2017, represented the latest figure of the external reserves.

In November, 2017, the Federal Government of Nigeria 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 has also being said to have contributed immensely to the Africa’s largest economy forex reserves.

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

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

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, which 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 $25.8 bn 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 $30.29 bn on March 30, 2016 from $25.84 bn 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.

According to Cowry Asset Managers “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”, the asset managers has said.

CBN projection

The CBN Governor, Mr. Godwin Emefiele, projected that the nation may achieve $60 bn external reserves in 2019, should this trend persist.

He said increases in the price and shipment of oil, Nigeria’s biggest foreign-currency earner, and improved investor confidence mean the CBN can build its reserves to $60bn in the next 12 to 18 months, from $40 bn currently.

“Things are looking up. No one ever thought the price of crude would hit $70 per CV barrel in such a short period of time”, he said during an interview with Bloomberg.

Investors’ FX window

The steady rise in the external reserve, from July 7 last year, is occasioned by improved foreign exchange inflow occasioned by increase in crude oil price, dollar inflow from foreign portfolio investors facilitated by the Investors and Exporters (I&E) window introduced in April last year, as well as reduction in dollar sale through CBN’s forex intervention.

For instance, total turnover trade on I & E FX window raises to $25.65bn in nine months of 2017,Daily Times can report.

Data obtained by Daily Times from FMDQ OTC securities Exchange revealed that $0.61bn or N1865.66 billion total turnover was traded in April and increased by 114 per cent to $1.32bn or N403.92 bn in May.

Total turnover on the I & E FX window in June and July were $1.63bn or N498.78bn and $1.86bn or N569.16bn , respectively.

Data from FMDQ OTC stated that total turnover gained momentum in August 2017, as newly created window reached $3bn per month.

According to the data, I & E FX window in August was estimated at $3.54bn or N1.08 trillion, while in September, total trade on the I & E FX window closed at $4.61bn or N1.41trn.

For October it dropped to $4.30 bn or N1.32 trn.

In addition, the total turnover trade on the I & E FX window in November and December were $4.51bn or N1.38 trn and $3.27 billion or N1 trn , respectively.

The I& E FX was created by the CBN to boost supply of foreign exchange into the Nation’s economy, attract more investments and stabilize the foreign exchange market.

CBN introduced the special window for investors, exporters and end-users of foreign exchange on April 21, 2017 ,as part of its efforts to deepen the FX market and accommodate all the foreign exchange obligations.

Finance analysts said the absence of CBN’s weekly intervention also thrust trading on the specialized window though the foreign exchange market remains relatively stable.

Expressing his view, the President, Association of Bureau De Change Operators of Nigeria (ABCON) , Alhaji Aminu Gwadabe, said transaction turnover recorded at the I & E Fx window in 2017 was an impressive reflection of the increasing level foreign investors/exporters confidence from a zero level of confidence.

According to him, the window enhances the realization of investors request for transparency and best global practice in the Forex market.

The Associate Professor and Head, Banking & Finance department Nasarawa State University, Prof Uche Uwaleke, said, “There is no question that the Investors and Exporters window introduced by the CBN sometime in April 2017 was one of the best developments in the forex market last year.

“It came at a time the market was facing liquidity crisis and foreign investors confidence was waning.

“The window helped in no small measure in boosting liquidity and access to forex by creating an autonomous channel where the exchange rate is market determined.

“So, the huge turnover recorded since the introduction of the NAFEX points to the strong confidence that investors now have in the Nigerian economy.

“This measure, supported by the CBN’s sustained intervention, has aided the near convergence of rates across all market segments”.

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

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.