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External reserves decline by $1.8bn – CBN

By The Citizen


The nation's external reserves have fallen by $1.8bn within a period of eight weeks, according to the latest statistics from the Central Bank of Nigeria (CBN) on Tuesday.

The CBN had said that depletion in the foreign reserves and Excess Crude Account was threatening the economy.

According to the statistics from the apex bank, the reserves fell from $44.5bn on December 3, 2013 to $42.7bn on February 3, 2013, depleting the reserves by $1.8bn in eight weeks.

Last year, the CBN defended the naira with $26.6bn from the nation's external reserves.

The reserves, which peaked at over $48bn in May last year, started falling and stood at $43.9bn on December 23.

The reserves fell to $43.5bn on January 2 before dropping further to $42.7bn on February 3, according to the CBN data.

The Monetary Policy Committee of the CBN had on January 21 expressed concern over the continued depletion of the Excess Crude Account, external reserves and portfolio inflows into the country.

The committee said the country had in the past one year witnessed a massive decline of $9bn in the ECA from $11.5bn in December 2012 to less than $2.5bn on January 17, 2014.

It stated that the gross external reserves as of December 31, 2013 stood at $42.85bn, representing a decrease of $980m or 2.23 per cent compared with $43.83bn at the end of December 2012.

The committee noted that the decrease in the reserves level resulted largely from a slowdown in portfolio and Foreign Direct Investment flows in the fourth quarter of 2013.

This, it noted, had resulted in increased funding of the foreign exchange market by the central bank in a bid to stabilise the naira.

The CBN Governor, Mr. Lamido Sanusi, said the absence of fiscal buffers had increased the country's reliance on portfolio flows.

He identified four key concerns for policy in the short to medium-term.

The concerns are depletion of fiscal buffers following the continued decline in oil revenue; rundown of reserves and depletion of excess crude oil savings; falling portfolio and FDI inflows; widening gap between the official and the Bureau de Change exchange rates; and creeping increase in core inflation.

He said remittances to the external reserves remained low, while much of the previous savings had been depleted, thereby undermining the ability of the central bank to sustain exchange rate stability.

'We need to tighten control; we need to check where the money is going. It will be tough for us, it will be tough for the fiscal authorities and elections are coming up in 2015.'

Sanusi urged the fiscal authorities to provide support by reducing fiscal leakages, improving controls around oil revenues and reviewing terms around production sharing agreements with oil companies, while awaiting the passage of the Petroleum Industry Bill.

He noted the necessity for a complementary monetary policy response to ensure sustained exchange rate stability and convergence of rates in various segments.