MAY 4, 2015
‘External reserves can't pay for more than 3 months of imports’ BY OMOH GABRIEL
Drops 1% from $29.8 billion to $29.5 billion by April 28
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HE nation's foreign exchange reserves fell one per cent month-on-month to $29.5 billion by April 28, from $29.8 billion a month earlier, the central bank said weekend. This implies that the reserves at the current rate of importation can support just three months of import. The reserves were down 22.6 per cent year-on-year when they stood at $38.14 billion. The apex bank, Central Bank of Nigeria has used its foreign exchange reserves to support the local currency in the wake of falling global oil prices. At the foreign exchange market last week despite dollar auction sales worth $91.2 billion by international oil companies on Monday, the Naira closed flat at N199.10/$1.00 at the interbank market. This rate was maintained throughout the week. Similarly, the CBN’s clearing rate steadied at N197.00/$1.00 for the week. As a follow up to the CBN’s withdrawal limit on overseas card holders to $50,000 (from $150,000) per annum and daily cash withdrawals to $300, the apex bank has further clarified that customers’ cards linked to domiciliary accounts overseas are not affected. Demand for the dollar by travelers may increase locally as a result of this decision, market operators say they expect exchange rate to continue to trade within the current level at the inter-bank segment of the foreign exchange market in the coming week. However, at the BDC segment of the foreign exchange market, the Naira depreciated by N3.00 or 1.3 per cent to N220.10/$1.00 from N223.10/$1.00 The national economy, pre-general elections was facing huge financial haemorrhage as politicians, corporate bodies and foreign investors moved funds massively out of the country as well as from Naira to dollar. In January 2015, data available at CBN showed that the sum of $2,196,805,444.97 was
paid out by the CBN as international remittances on behalf of Nigerians. In February, the sum of $1,273,415,392.55 went out as payments.
In a survey of payments made by the CBN on behalf of the public in 2014, a total of $22.1 billion went out of the country in five weeks, an average of
$4.5 billion a week. While about $3.083 billion went out in the week ending 31st July 2014, the amount of foreign exchange flowing out of the country rose to $4.2 billion for the week ending 30th August. It however dropped to $4.1 billion on the 30th of September and moved astronomically to $5.29 billion for the week ending 31st October 2014. The foreign exchange outflow went further up to $5.35billion for the week ending November 30th. This capital flight has resulted in the crash of the naira exchange rate which had remained stable before the election and the crash of the international crude oil price. CBN defends Naira with $4.7bn The Central Bank of Nigeria in the bid to raise the value of the local currency has spent $4.7 billion so far this year to defend the naira even as the nation’s external reserve fell further to $29.6 from $29.6 billion at the middle of April 2015. Data published by the CBN on its website show that the external reserve fell by $189 million from $29.778 billion on April 2nd to $29.589 billion on April 9th. Consequently the reserve has fallen by $4.879 billion since December 31st 2014. Commenting on developments in the nation’s foreign exchange market in the first quarter of the year, Managing Director/Chief Executive, Financial Derivative Company Limited, Mr. Bismarck Rewane had said that the apex bank had so far spent $4.7 billion to defend the naira this year, adding that the nation’s external reserve import and payments cover has fallen to 4.8 months, 1.2 months below the international standard for healthy external reserve. Rewane also stated then that the 13 per cent appreciation of the naira in the parallel market in the last two weeks to N197 per dollar from N225 was due to election sentiment and elimination of fear premium. He predicted that the appreciation would soon be reverse and Continues on page 22 C M Y K