Nigeria’s gross external reserves have continued to decline. In February 2023, forex reserves reduced by $317 million to $36.7 billion, according to data from the Central Bank of Nigeria (CBN). A new report by FBNQuest says that the latest decline can be attributed to reduced foreign exchange (FX) inflow into the economy and increased demand pressure on the gross official reserves. “With the exception of accretions recorded in the months of April, June, and July 2022, the gross official reserves have been declining steadily since November 2021,” FBNQuest said.
In addition, Bismarck Rewane, the managing director of Financial Derivatives Company Limited, said Nigeria’s sources of foreign exchange remain weak due to sub-optimal oil production induced by oil theft. In August 2022, stolen oil worth N86.2 billion was recovered, and that is just one of the many instances of recovery or discovery of theft. Rewane said in his latest presentation at the Lagos Business School that Nigeria FX earnings suffer from capital flow reversal because of global monetary tightening and exchange rate premium at the parallel market.
Experts blame CBN intervention at official FX market.
Other experts have attributed the decline in foreign reserves to not only the dwindling oil production but also the constant intervention by the CBN at the official FX market in a bid to defend the local currency. Henry Ogbuaku, the head of asset management at Growth and Development Asset Management Ltd, said that the bulk of the country’s foreign exchange earnings come from the oil sector. However, Nigeria has not been meeting its OPEC crude oil production quota because of oil theft and pipeline vandalism.
Also, Kelvin Atafiri, the CEO of Cavazanni Human Capital Limited, said that the decline in external reserves was an indication of limited or inadequate accretion to external reserves. Atafiri said that the only major contributing source to foreign reserves is crude oil exports, and since has not able to meet her Organization of the Petroleum Exporting Countries’ (OPEC) production quota, it is therefore expected that the country’s external reserves will suffer such a level of inadequacy.
Country’s oil production has increased in the last few months.
According to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC)’s latest oil production status report, crude oil output rose to 1.3 million barrels per day (bpd) in February. This is the highest in 13 months. NUPRC data show that the country’s oil production increased by 39 percent from 937,766 bpd in September when the country was battling with oil theft and pipeline vandalism in the Niger Delta region. On a month-on-month basis, with crude oil output rising by 48,154 bpd in January.
Atafiri revealed that oil earnings take about three months to settle in cash. This means that most of the transactions for higher oil prices recorded in recent weeks are yet to settle in, he said. Several miles south of Nigeria, South Africa also battles the same problem. Like Nigeria, South Africa’s official reserves fell by almost $760 million to $54.1 billion. FBNQuest said that the drop in the country’s international liquidity position is mainly caused by the decline in gold price during the month as well as adjustments due to the appreciation of the US dollar.
The 5th most indebted African country to China is Nigeria.
Recent data has shown that Nigeria, Africa’s largest economy, is one of the most indebted African countries to China. It owes $4.15 billion to the Asian country. In contrast, Egypt’s official reserves increased by about $128 million to about $34.4bn in May, primarily because of external debt service repayments comprising mainly of Eurobonds and IMF loans. In December 2022, the International Monetary Fund approved a $3 billion extended fund facility for the country over a 46-month period to help cover its balance of payment deficit.
Related Link
Central Bank of Nigeria: Website
Nigeria’s external reserves decline by $317m – Forex earnings dwindle due to sub-optimal oil production caused by oil theft. – Express your point of view.
The major problem facing the country which countiniously making the country having increase in debt is corruption of the people in government and if it is continue, nothing can be done to reduce the debt.
In a bid to turn around situations, corruption, oil theft and pipeline vandalism are to be tackled. The fight against them should be on.
The problem needs to be addressed from the grassroots where it’s coming from unless the issue will continue to persist.
The level of debt owed by Nigeria and s too much. I don’t even know what the government are using the money for and it’s not as if there is a significant development in the country.
We are owning a huge debt our government just keep borrowing money the debt just keep occupying we should find something to it soon
Nigeria debt has set the country back in so many ways. This bad government in Nigeria is not making any effort at All
All this oil theft will just let us continue to lose money it need to be stopped the country debt is going more higher we need to limit this also, fighting corruption, oil theft and so on need to be resolved
The reduced foreign exchange inflow into the economy which is the primary cause of the decline should be addressed.
This external reserve decline is a serious matter to tend to. Government needs an effective measure on this.
Nigeria is so indebted. What we need now is having multiple streams og income and creating a lasting solution to oil theft. The oil theft poses a significant influence on the economy
It’s absurd that oil thievery and pipeline sabotage have prevented Nigeria from producing enough crude oil to meet its OPEC quota.
It’s unfortunate that Nigeria’s foreign exchange revenues have fallen victim to capital flow reversal as a consequence of international financial restriction and currency rate advantage on the black market.
Oil theft is no new news in Nigeria, the government ought to take extra measures in protecting our major source of income
It is the time to diversify our revenue streams and find a long-term answer to the problem of oil theft. Theft of oil has major implications for the global economy.
Traders should be aware that the reduction in the price of gold this month is a major contributor to the country’s worsening foreign cash flow.
So many factors are seriously hampering the growth of our country’s economy, the government should employ more security to these oil ridden areas so that the pipeline vandalism will atl least reduce.
The level of oil theft is becoming a thriving thing. By now, there ought to be a proactive solution in place. We are in so much debt, and we can’t afford to be getting short of finances
If what is causing the decline in our external reserves is oil theft and lost of oil through vandalisation then government should act strategically in resolving it rather than being forceful.
I will say mismanagement is the major cause of the decline in the external reserves of Nigeria. If the oil theft and pipeline vandalisation were properly address and brought under control there will be no decline in the external reserves.
Our external reserve is really decreasing. We have had enough foreign exchange and generated enough income. It is now affecting our external reserve.