External Reserves Declines by $394m in 13 Days

• External Reserves Declines by $394m in 13 Days

Nigeria’s foreign reserves have declined to a three-month low of $47.303 billion, according to the Central Bank of Nigeria report published on its website on Wednesday.

The foreign exchange reserves declined from $47.697 billion posted on July 11 to $47.303 billion on Wednesday, a decline of $394 million in 13 days.

While the decline is marginal given the size of the reserves, it also gives weight to the Central Bank of Nigeria led Monetary Policy Committee comments on Federal Government saving policy and increased allocations due to the surge in global oil prices.

According to the Monetary Policy Committee, “It was observed that as the prices of crude oil rose in 2017 and 2018, the monthly allocation to various levels of government also increased, suggesting that the Federal Government may not be saving adequately for the future. The Committee, therefore, advised the fiscal authority to build-up buffers, especially now that the price of crude oil is relatively high.”

In the communiqué No 119 of the MPC meeting of July 23 and 24, 2018, which was published on Tuesday by the CBN, the committee retained monetary policy rate at 14 percent and expressed optimism that the external reserves would see further accretion, citing bullish global oil market.

Analysts at Investors King Limited attributed the fluctuations in the foreign reserves to government spending, necessary to support economic productivity and sustain its continuous foreign exchange intervention.

“The increase in spending is not out of order, given the fragile state of the recovery. The economy is still recovering, therefore, it is normal to see a surge in government expenditure, especially now that revenue generation has improved through changes made to tax policy. However, the focus should be on the non-oil sector to further diversify the economy and deepen growth.”