Nigeria’s external reserves have once again continued its bullish run, edging towards $45 billion thresholds which it last recorded six months ago.
According to data obtained from the Central Bank of Nigeria (CBN) web page, Nigeria’s gross external reserves hit $44.7 billion as at Wednesday this week.
The break down shows that out of the gross external reserves of $44.14bn, external reserves liquid rose to $43.67bn, while blocked external reserves stood at $1.03 bn which represents as 2.13 per cent of the total gross reserves.
External Reserves gained $567 million in 2 weeks
External Reserves official statistics from the CBN shows that within the last two weeks, external reserves gained momentum and inched up by $567 million.
Two weeks earlier, Nairametrics reported that external reserves stood at $44.14 billion. Hence, the external reserves have recorded a 1% increase within the last two weeks.
Reserves may hit $45bn mark as Oil price rallies
Crude oil prices reportedly rallied to $70.43 last week Friday, ending the week bullish for the first time since November 2018. Also, the report has also shown as at the time of filing this report, Brent oil price has rallied to $71.63 per barrel. The rising crude oil prices amidst the Organization of the Petroleum Exporting Countries (OPEC) Cartel cut, Nigeria revenue in the short run is expected to record a windfall.
By extension, with over 90% of Nigeria’s foreign exchange earning generated from oil export, surging oil prices will likely push the external to break the $45bn mark before the month ends.
Why robust reserves matter
The foreign reserve could be held to Safeguard the value of the domestic currency and also to make a timely meeting of international payment transactions. Also, building reserves represent a form of wealth accumulation portfolio for future consumption purposes. Further, the periodical intervention by CBN to manage the exchange rate is achieved with the aid of Foreign exchange reserves.
Nairametrics had earlier reported the $US39.9 billion CBN injection into FOREX market in 2018, and the relative stability of the exchange rate is traceable to the periodic intervention by the CBN. Hence, the rising external reserve has been a buffer to stabilise the naira.
It can, therefore, be argued that an increase in foreign exchange reserves improves the current account, and consequently enhances economic growth.