Nairametrics| Nigeria’s external reserves fell from about $29 billion on December 31 2015 to $25.8 billion by December 31, 2016. This represents a drop of about $3.2 billion or 12% year on year.
Nigeria’s external reserves has been on the decline since the start of the fall in crude oil prices in July 2014. Data from the CBN reveals Nigeria’s external reserve position was about $39 billion in July 2014 showing a drop of over $14 billion since then. In fact, Nigeria’s external reserve position has dropped nearly every month since then (except for June and December 2016).
An article from Reuters reveals Nigeria’s oil production rose to 1.70 million barrels per day (mbpd) in November, up from 1.65 mbpd the previous month, which lifted the West African country forex reserves. This perhaps explains the rise in reserves towards the end of 2016.
Analysts believe Nigeria’s external reserves position is also likely to rise in January as oil prices continue to pick up following OPEC decision to cut output. An uneasy calm in the Niger Delta has also renewed hopes that crude oil production could rise to 1.8mbpd even though data shows Nigeria is still around the 1.6mpd region.
Nigerian external reserves relies heavily on crude oil sales to remain within acceptable levels. A decline in Nigeria’s external reserve position often leads to harsh capital controls, dollar scarcity and a depreciation of the naira. With inflow from foreign investments drying up by the day, the CBN relies heavily on crude oil sales to boost in dollar reserves.