Nigeria’s Foreign Reserves Continue Decline

VENTURES AFRICA – Despite the aggressive intervention by the Central Bank of Nigeria (CBN) to support the Naira from depreciating, the Nigerian foreign reserve continues to suffer a steady decline as a result of the dwindling prices of crude oil in the international market.

As at June 27, the Nigeria’s foreign exchange reserve dropped by 2.17 percent. It sharply reduced from its former stand at $37.686 billion on June 1 to $36.829 billion – making a total decrease of $857 million.


According to Reuters, the reserves were back to the level they were on May 10, at $36.85 billion, but were higher than the $32.01 billion Africa’s second biggest economy had in reserve a year ago.


The Naira has fallen in the last three months due to an exit of offshore investors from the local debt market and strong demand for the dollar.


This Day also reported that Oil prices tumbled further last Thursday despite an agreement by European leaders in Brussels, to use the continent’s bailout fund to save struggling banks in the zone. Light sweet crude fell $1.60 to $78.61 per barrel on the New York Mercantile Exchange last Thursday. Brent crude also fell by $1.33 to $92.17 per barrel.
On the foreign exchange transaction, the naira fell by 22 kobo to close at N163.12 to a US Dollar on Friday, from N162.90 to a dollar the preceding Friday. Also at the bi-weekly auction, the local currency dropped marginally by 3 kobo to close at N155.94 to a dollar at last Wednesday’s auction, compared with the N155.90 to a dollar it stood the preceding Wednesday.


Altogether, the CBN offered $700 million last week, lower than the $750 million offered the preceding week.


Quoting the Wholesale Dutch Auction System (WDAS) data on the apex bank website, Leadership newspapers said the aggregate dollar supplied at the bi-weekly auction stood at $2.75 billion in June indicating a whopping increase of 69.75 per cent over the $1.62 billion sold in May and 154.6 per cent over the $1.08 billion sold in April through the same window.
However, despite this development and the worry that the Federal Government might not meet up with its revenue projections in the 2012 budget, the Director General, Budget Office of the Federation (BOF), Dr. Bright Okogu, had assured that there was no cause for alarm.


“Our oil is not benchmarked on the WTI, it is benchmarked on the Brent crude which is similar to the Bonny Light that is between 36 and 37 American Petroleum Institute (API) gravity. However, at this point, we have to be prepared to make sure that we manage what we have at all level. The development also justifies the reason why we have been arguing to have a robust Excess Crude Account (ECA) or Sovereign Wealth Fund (SWF) that can be used to protect the economy during times when oil prices may come down,” he said.