Economic uncertainty amidst weak fundamentals continues to drag on Nigeria’s foreign reserves and ability to support its huge dollar-dependent economy. The total value of Nigerian foreign reserves depreciated by $21.695 million in the first six days of 2022, according to the latest data published by the Central Bank of Nigeria.
A breakdown of the numbers revealed that foreign reserves stood at $40.521 billion as of December 31, 2021 before declining to $40.499 billion on January 6, 2022, in spite of rising oil prices. In the last one month, the reserves have dropped over $1 billion when compared to the $41.155 billion attained on December 1, 2021.
Still, the external reserves is on target to hit $42 billion in the first six months of 2022, a CBN target announced by Godwin Emefiele, the Governor of the apex at the France-Nigeria Security and Economic Summit, in Paris, France in November 2021.
According to him, the increase will be on the back of rising crude oil prices and the Eurobond the country planned to issue in 2022.
He said “Nigeria’s external reserves are expected to surpass US$42 billion by mid-2022. This is due to the sustained increase in crude oil price, the impact of Eurobond Issuance, and the stable exchange rate condition.”
“Nigeria’s FX reserves has increased to over US$40bn from about US$33.4bn in March 2020 due to inflows from the IMF, Eurobond proceeds, and complemented by CBN’s astute management of the foreign exchange market,” the governor said.
However, experts have blamed Nigeria’s inability to grow its external reserves on the weak manufacturing sector and overly dependent on importation for most of its consumption, leading to high forex demand and a double-digit inflation rate. Over 90 percent of Nigeria’s foreign revenue comes from crude oil sales with little to zero from the manufacturing sector.
Still, Nigeria has struggled to up its oil production, build a viable crude oil refinery and reduce the cost of production to really take advantage of its only viable source of foreign revenue.