Slipping back up funds: Nigeria’s external reserve dips $24m in first week of 2022
By Olanrewaju Olusegun
with agency report
Nigeria’s external reserve dipped $24.3 million in the first week of the year to close at $40.49 billion as of 7th January 2021. This represents a 0.06 per cent decline when compared to $40.42 billion recorded as of the start of the week. This is according to data from the Central Bank of Nigeria (CBN) on the daily reserve movement.
The nation’s foreign reserve had gained $5.99 billion in October, following a $2.76 million gain recorded in September 2021 as a result of the $4 billion Eurobond secured by the federal government and the $3.35 billion IMF Special Drawing Rights facility.
However, the reserve started a downward movement in November after it has crossed the $41 billion mark. Nigeria’s external reserve lost $611.01 million in November, which was followed by a $666.17 million decline in December. Meanwhile, the annual gain for 2021 was $5.15 billion.
The continuous decline in the nation’s external reserve is attributable to the intervention by the apex bank in ensuring forex stability in the country. Data from the Central Bank shows that a total of $8.97 billion was supplied by the bank to the I&E window, SME, and Invisibles.
The Investors and Exporters window (I&E) is the official market for the sale of foreign exchange in the country after the Central Bank halted the sale of forex to BDC operator’s mid-2021.
However, a sum of $2.77 billion had been sold to the BDC operators between January and June 2021. Given the managed floating foreign exchange system adopted by the apex bank, the CBN occasionally intervenes in the forex market to ensure they manage the volatility that could be witnessed in the market by releasing funds from the reserve.
A cursory look at the data from Nairametrics Research on the I&E Window, at least a sum of $337.7 million was traded on the exchange, while the official exchange rate appreciated by 4.3 per cent to close at N416.25/$1 in the review week compared to N435/$1 recorded as of the end of the previous week.
Foreign reserves are assets held on reserve by the central bank of a country used to back liabilities and influence monetary policy. They include foreign banknotes, deposits, bonds, treasury bills, and other foreign government securities.
Meanwhile, the World Bank has said the Nigerian economy is expected to grow by 2.5 percent in 2022, up from an estimated 2.4 percent growth in 2021.
The Washington-based institution disclosed this in its latest Global Economic Prospects report released yesterday.
The bank attributed the rebound to higher oil prices as well as accelerated growth in telecommunication and financial services.
“In Nigeria, growth is projected to strengthen somewhat to 2.5 percent in 2022 and 2.8 percent in 2023,” the report reads. “The oil sector should benefit from higher oil prices, a gradual easing of the Organization of the Petroleum Exporting Countries (OPEC) production cuts, and domestic regulatory reforms.
“Activity in service sectors is expected to firm as well, particularly in telecommunications and financial services. However, the reversal of pandemic-induced income and employment losses is expected to be slow; this, along with high food prices, restrains a faster recovery in domestic demand.
“Activity in the non-oil economy will remain curbed by high levels of violence and social unrest, as well as the threat of fresh COVID-19 flare-ups with remaining mobility restrictions being lifted guardedly because of low vaccination rates- just about 2 per cent of the population, had been fully vaccinated by the end of 2021.”
According to the report, new threats from COVID-19 variants and a rise in inflation, debt, and income inequality could endanger the recovery in emerging and developing economies.
It further predicted that per capita income is expected to be lower in 2022 than a decade ago in countries such as Angola, Nigeria, and South Africa.
