External reserves dropped by $1.8bn in three months By Oyetunji Abioye

The nation’s external reserves have dropped by $1.8bn within the space of three months, according to the latest data from the Central Bank of Nigeria.

The data posted on the CBN’s website on Tuesday showed that the foreign reserves dropped by $1.8bn from the peak of $48.85bn on May 2 to $46.98bn on August 5.

The Federal Government had targeted $50bn reserves by the end of 2012.

The reserves, however, closed the year at $44.26bn on December 24, 2012, finishing $6bn below the government’s target.

The performance of the reserves was driven mainly by proceeds from crude oil, gas exports and crude oil-related taxes as well as reduced funding of the Wholesale Dutch Auction System on the account of huge inflow of foreign portfolio investments.

The Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, said in May that the outlook for the country’s foreign reserves this year was mixed.

Sanusi told Bloomberg that the foreign-currency reserves would probably keep expanding, while facing risks from lower-than-projected oil output and falling prices.

He said, “Quantitative easing by central banks in the United States, United Kingdom and Japan all point to a likelihood of strong capital flows to emerging and frontier markets that may benefit Nigeria.

“Still, the combination of lower global oil prices and weak output performance in Nigeria may lead to a slowdown.”

Oil production in Nigeria fell to 1.81 million barrels a day in March, the lowest level since September 2009.

According to the CBN, the country relies on crude exports for about 80 per cent of government revenue and more than 90 per cent of foreign income.

“We always said that the budget based on projections of about 2.5 million barrels per day was founded on overly optimistic and unrealistic assumptions,” Sanusi said.

The Minister of Finance, Dr. Ngozi Okonjo-Iweala, had stressed the need for the country to shore up its external reserves.

The latest CBN data showed that the nation’s external reserves dropped to $46.98bn on Monday, barely one week after hitting the $47bn mark.

The external reserves had dropped to a five-month low of $46.96bn three weeks ago, according to the CBN data.

The foreign reserves had hovered between $47bn and $48bn marks since February 20, 2013, when the nation recorded 46.96bn.

Between February 21 and July 15, the external reserves hovered between the $47 and $48bn marks.  On July 16, the external reserves dropped to $46.99bn.

The country’s foreign reserves had fallen 2.78 per cent month-on-month to $47.11bn on July 11.

Reserves at Africa’s second biggest economy stood at $48.46bn on June 11. They have risen about 30 per cent year-on-year this month, from $36.47bn in the same period last year.

The nation’s external reserves had a few weeks ago dropped to $47bn, after being stagnant at $48bn for over three months.

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