Nigeria’s external reserves decreased by US$170 million in July to US$44.90 billion following lower portfolio inflows as well as drop in oil prices.
The stated reserves, according to FBNQuest, provide cover for 12.4 months of merchandise imports on the basis of the balance of payment (BoP) for the 12 months to Q1 2019, and 7.0 months when services are added.
There was a marginal increase in capital importation via the Investors and Exporters Foreign Exchange Window (I&E window) in July 2019 following a drop in June 2019.
Total capital importation through the I&E window in July 2019 stood at US$1.96bn, marginally up from US$1.91bn.
The price of oil has been trending downward. In the last few days, it has dropped below $60 per barrel, from over $70/b in April, as a result of fierce trade tensions between US and China which has impact on the global economy. Crude oil price settled at $57 per barrel on Friday, which is $3 below the Federal Government’s 2019 budget benchmark.
Ayodele Akinwunmi, head, research, FSDH Merchant Bank Limited, said this may have negative impacts on revenue and other key prices in Nigeria.
However, the Nigerian central bank has been intervening in the currency market over the past two weeks to keep the naira stable.
The Central Bank of Nigeria (CBN) on Friday injected $280.04 million and CNY28.3 million in the spot and short-tenored forwards segment of the inter-bank foreign market.
The latest interventions in the inter-bank foreign exchange market, which were announced on Friday, August 9, 2019, by Isaac Okorafor, director, corporate communications department, were for requests in the agricultural and raw materials sectors as well as Renminbi-denominated Letters of Credit.
Okorafor further expressed satisfaction over the stability of the foreign exchange which, according to him, was largely due to sustained intervention by the CBN.
He reiterated assurances that the bank’s management would remain committed to ensuring that all the sectors of the forex market continue to enjoy access to the needed foreign exchange.
It will be recalled that the CBN on Tuesday, August 6, 2019, offered authorised dealers in the wholesale segment of the market the sum of $100 million, while the Small and Medium Enterprises (SMEs) and the invisibles segments each received the sum of $55 million.
Meanwhile, $1 exchanged for N358 at the Bureau de Change (BDC) segment of the foreign exchange market, while CNY1 exchanged at N46 on Friday.
FSDH Research expects a total inflow of about N1.54trn to hit the money market from the various maturing government securities and the FAAC in August 2019.
“We estimate a total outflow of approximately N1.45trn from various sources, leading to a net inflow of about N89.81bn,” analysts at FSDH said.
FBNQuest report show an increase of US$500m in Egypt’s reserves in July via FPI flows and for the 2017/18 fiscal year (July-June), the comparable figures are 8.4 months and 7.2 months. Egypt has a worse balance on goods than Nigeria but its services account is much stronger.
“We stress that in both cases the buffer is healthy by any criteria,” FBNQuest said.
HOPE MOSES-ASHIKE
