BY BAMIDELE FAMOOFO
Pressure on the Nigerian foreign exchange reserves has forced it to shed $1.5 billion (about N651 billion) as at September 29, 2022.
The nation’s foreign reserves keep falling despite the surge in crude oil prices.
Financial market analysts have attributed the worrisome trend to failure of the country to capitalize on the significant rally of crude oil prices to enhance her foreign reserve position.
The foreign reserves of Africa’s second biggest exporter of crude oil stood at $38.285 billion as at September 29, 2022 a drop from $40.51 billion as at January 4, 2022, indicating a decrease of over 5 percent during the review period.
Johnson Chukwu, Group Managing Director, Cowry Asset Management Limited, while reviewing the performance of the economy, recently, expressed worry that despite the interventions of the Central Bank of Nigeria, the Nigerian economy is starved of foreign exchange as demands are not being met, with outstanding demand queues stretching as far back as 2021.
He pointed out that foreign airlines have had issues recently repatriating their earnings from ticket sales, a show that further underlines the forex scarcity in Nigeria.
The recent drop in oil prices – Brent crude reached as low as $80 per barrel in September– in combination with low production levels does not bode favourably on the oil front.
In August 2022, oil output stood at 0.97mbpd, a decrease of 0.07mbpd when compared to the production level in August 2021 (1.35mbpd). The previous uptick in oil prices was driven by the supply disruptions that ensued from the Russia-Ukraine conflict, which resulted in Oil & Gas supply shortages.
“That surge did not reflect in remittances into our reserves, also due to our underperforming oil production. Massive oil theft is also thought to be responsible for the underproduction of oil, leading the nation to miss out on the relative boom in oil prices and denying the economy of needed petrodollars,” Chukwu stated.
Failure of the NNPC in July to report crude oil sales has been seen as a major event that impacted negatively on the reserves.
“This is the first time since NNPC was founded 45 years ago that Nigeria is reporting zero revenue in a month. The zero oil revenue being reported is despite Nigeria’s oil production averaging 1.183 million per day or 36.5m a month in July. This has grave implications on fiscal stability and is contributory to a rising fiscal deficit,” he said.
Meanwhile, the parallel market exchange rate between the naira and the US dollar fell further to a record low of N735/$1 on Friday 30th September 2022, ending the quarter with a further dip.
On the official I&E window, the exchange rate at the official market closed at N431.87/$1 on Thursday, 29th September 2022, a drop of 3.87 percent from an open price of N415.77/$1 recorded on 1st July, 2022.
The Nigerian forex crisis is spiraling out of control in defeat to the stringent policies initiated by the CBN to tackle it.
On 21st September 2022, First Bank of Nigeria became the first commercial bank to announce to its customers that it will suspend international transactions on its naira Mastercard from September 30, an indication that the dollar scarcity is worsening.
This is following a previous reduction of monthly forex expenses from $100 to $20 – a CBN directive.
Analysts expect that there will be sustained FX pressure into the near future.
