External Reserves Up 3.5%, Hits $47.38Bn in Feb

Central Bank of Nigeria (CBN), at the weekend put the nation’s external reserves on February 28, 2013, at $47.38 billion, the highest in four years, rising by $1.603 billion or 3.5 per cent over the level in the comparable period of January.

In January, the reserves according to data published on the CBN website appreciated by $1.806 billion or 4.08 per cent, closing that month at $45.984 billion, bringing the growth in the first two months of the year to $3.206 billion or 7.25 per cent year-to-date.

Experts link the growth to improved currency inflow into the economy, as the CBN spends less of the reserves to fund the foreign currency sales on a weekly basis.

Although the reserves is however still below the $50 billion target set for December 31, 2012 by Dr. Ngozi Okonjo-Iweala ,Finance minister and Coordinating minister of the Economy, the growth, analysts say, has been helped by factors like the stable Naira against other major currencies, and the high oil prices at the international market.

The nation accumulated a total $45.984 billion at the end of last year in foreign reserves, representing an increase of $11.405 billion or 32.98 per cent growth in 12 months.

In a keynote address at the 46th annual dinner of Chartered Institute of Bankers of Nigeria (CIBN), in November last year, Lamido Sanusi, CBN governor, said a high external reserves is necessary to protect the economy from external shocks arising from decline in crude oil prices, and emphasised the need for fiscal restraint and fiscal consolidation.

“It is important not to be complacent and it is important to recognise that there are dark clouds in the horizon and it is extremely important to start building and continue building the fiscal buffers, go into a period of strong restraints and serious fiscal restraints and consolidation. We must continue to build up the external reserves and protect the economy from external shocks to oil prices and focus on the strength and resilience of the banking system.

“In a year that government removed 50 per cent of fuel subsidies, where you have very high increase in international food prices and energy prices, where you have general instability and where we had forecast that inflation might reach 14.5 per cent in August, inflation is still under 12 per cent.

Addressing participants at a forum, Rewane projected that continued “robust oil prices (this year) will allow for government expansion in infrastructure development.”

Also, analysts at FSDH Merchant Bank Limited, in a recent report noted “the favourable oil prices at the international market, improved domestic output, fiscal prudence, improved ratings from agencies and the inclusion of FGN Bonds in the JP Morgan Emerging Market Government Bond Index have all contributed to the improvement in the external reserves position of the country.

“The current external reserve can support stable exchange rate in Nigeria. The current level of external reserve is higher than both the International Monetary Fund and FSDH Research projections. The reserve is sufficient to cover over 11 months of imports of goods and services, higher than the threshold of three months.”