Nigeria’s foreign exchange reserves have depreciated by $790 million despite the rise in crude oil prices.
According to the data obtained from the Central Bank of Nigeria, the nation’s foreign reserves stood at $34.43 billion as at May 17.
Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said oil prices touched $70 per barrel for the first time since mid-March on improved oil demand amid the ease of restrictions in the United States, United Kingdom and some European countries.
The bullish outlook for oil is further bolstered by the pent-up travel demand that is set to be let loose in the summer with the resumption of international flights.
This could push Brent further up to $75pb by next month. While this is positive for fiscal and external accretion, the fuel subsidy debacle will present itself again, this time more ferociously.
“Domestic commodity prices are still rising in spite of conflicting data from the NBS. Has inflation peaked? Or what could possibly be moderating the impact of insecurity and supply chain disruptions on food prices? These are just a few of the questions that the MPC will ponder at their meeting next week” Rewane said.
The reserves decline has also been attributed to drop in diaspora remittances due to patronage of illegal remittance channels.
To reverse the trend, the CBN Governor, Godwin Emefiele, announced continued implementation of the ‘Naira for Dollar’ scheme, which gives N5 rebate for every $1 sent by Nigerians in diaspora to the country.
Previous foreign reserves movement showed that, on April 1, this year, the reserves stood at $34.85 billion, representing $404 million increase compared to $34.41 billion in third quarter.
The consumer price index, which measures inflation, dropped to 18.12 per cent last month while food inflation also declined to 22.72 per cent, the National Bureau of Statistics.
Aside from reserves and inflation, the naira also came under pressure amid devaluation fears. The local currency is exchanging at N485 to the dollar on the parallel market. However, on the the Investors and Exporters (I&E) Forex window, the currency depreciated to N411.50 to dollar.
Emefiele said that Nigeria, like other emerging market countries and countries reliant on oil exports, the retreat by foreign portfolio investors significantly affected the supply of foreign exchange into Nigeria.