How foreign reserves gained $2.44bn in less than 11 months

…As Naira steady against dollar across FX segments The nation’s external reserves under the watch of the Central Bank of Nigeria (CBN) has added the total sum of $2.44 billion to stand at $43.13 billion compared to $40.69 billion it stood as at end of January 2018. For instance, in the space of 12 days in December, the foreign reserves added $801 million, which represented an increase of 1.89 per cent, when compared the current balance of $ $43.13 billion to $42.33 billion it stood earlier in the month. The breakdown of the reserves showed that it was at $38.76 billion as of the end of last year December and closed in January at $40.69 billion, but moved to $41 billion on February 23 and finally closed the second month in 2018 at $42.49 billion. However, in the first quarter of 2018, the external exchange buffer of the CBN rose by $7.49 billion when the external reserves crossed the $46 billion mark to $46.26 billion on March 29, 2018. In April, the external reserves rose by $986 million or 2.1 per cent to $47.49 from $46.51 billion it opened. Interestedly, the external reserves were hovering around at $47.7 billion and $47.6 billion in May. The apex bank data, however, showed that the external reserves in the half-year of 2018 added $9 billion from $38.7 billion it opened this year to $47.8 billion as at June 29, 2018. Between July and August, the external reserves closed at $47.12 billion and $45.84 billion respectively. Further findings revealed that external reserves have depreciated by $6.04 between June and November 8, 2018, when it closed at $41.75 billion. The Governor of CBN, Mr. Godwin Emefiele, had explained at the 2018 annual bankers’ dinner of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos that the country’s overdependence on crude oil for foreign exchange (FX) revenue meant that shocks in the oil market were transmitted entirely to the economy via the FX markets as manufacturers and traders who required forex to purchase their inputs as well as goods, were faced with a depleting supply of foreign exchange in the country. According to him, “the impact of this decline on our reserves was evident in the rise in the value of the US Dollar relative to the Naira; and a rise in the Consumer Price Index due to the increase in the cost of imported inputs and goods. In a bid to contain rising inflation and to cushion the impact of the drop in FX supply on the Nigerian economy, the Bank took three bold steps”. He noted that the apex bank, firstly, tightened money supply in order contain inflation while improving yields in local bonds, which attracted the attention of foreign investors. “Secondly, we analyzed our import bill and encouraged manufacturers to consider local options in sourcing their raw materials, by restricting access to foreign exchange on 41 items. Third, the Investors and Exporters FX (I&E) window was introduced, which allowed investors and exporters to purchase and sell foreign exchange at the prevailing market rate. “The impact of these three measures led to an increase in foreign exchange inflows into the country; Transactions in the I&E FX window reached $24 billion ($6 billion net inflows) in 2017 and Nigeria’s foreign exchange reserves rose to over $48billion at the end of May 2018 from $23bn in October 2016,” Emefiele stated. Motolani Oseni