29 March 2015, Lagos – The value of Nigeria’s external reserves, which has been on the downswing in the past few weeks, fell below the $30 billion mark to $29.865 billion as at March 25, 2015, according to latest Central Bank of Nigeria’s (CBN’s) figures.
It was discovered that the current level of the foreign reserves, which is derived mainly from the proceeds of crude oil earnings, has fallen by 13.4 per cent or $4.628 billion this year, compared with the $34.493 billion it stood at the beginning of the year.
This has been attributed to the significant reduction in forex inflow into the country occasioned by the sustained low crude oil prices.
Oil prices however rallied for a second straight day on Thursday after Saudi Arabia and its Gulf Arab allies began air strikes in Yemen, sparking fears of a bigger Middle East battle that could disrupt world crude supplies. Brent crude was up $2.45 to close at $58.93 a barrel on Thursday.
Meanwhile, foreign investors on the Nigeria Stock Exchange (NSE) sold off N132.68 billion ($667 million) stocks in the first two months of the year, data from the NSE has shown, hurt by a weaker naira currency and jitters over tomorrow’s elections.
Nigeria faces a presidential election with front runners President Goodluck Jonathan and former military ruler Muhammadu Buhari facing off in a contest many think is too close to call.
The electoral body last month delayed the polls by six-weeks to March 28 citing security concerns, sending financial markets into a tailspin, with the naira crashing through a psychological level of 200 to the dollar for the first time.
Foreign investors also increased the pace of outflows from Africa’s biggest economy as global oil prices plunged, according to a Reuters report. The main share index rose 0.6 per cent to 30,073 points on yesterday, doing little to erase losses on the bourse, down 13.8 percent so far this year. One of the top decliners at the bourse is Dangote Cement, which accounts for a third of market capitalisation and reported weaker earnings yesterday, has fallen 23.7 percent so far this year.
The plunge in oil prices is having a dramatic effect around the world. Weaker global oil consumption and increasing global oil supply spurred by the US energy boom have conspired to send oil prices to lows not witnessed since 2009. Consumer nations have been smiling all the way to the gas pump while producer nations like Venezuela, Nigeria and Russia are being bruised badly. According to the International Energy Agency (IEA), even the previously booming US shale industry is also likely to be tested if sub-$50 per barrel prices persist.
For Nigeria, the fall has ignited a chain reaction which threatens its macro-economic stability. Oil revenues and foreign exchange receipts are on the decline while external reserves have dwindled. These events have forced monetary and fiscal adjustments.
*Obinna Chima – Thisday