Connect with us
nairametrics
UBA ads

Business News

External reserves decline by over 8%, despite lower FX demand

Nigeria’s external reserves have continued to decline unabated as it shed $3.33 billion within the last 3 months.

Published

on

CBN health intervention fund gets new interest rate by March 2012, Nigerian banks’ non-performing loans drop significantly by 41% in 2019, External reserves decline by over 8% in 3 months, Nigeria’s external reserves increase by $1.36 billion in 13 days

Nigeria’s external reserves have continued to decline unabated as it shed $3.33 billion in first quarter of 2020. The external reserves dropped from $38.59 billion on December 31, 2019, to $35.26 billion as at March 30, 2020. This represents an 8.6% decrease.

The latest figure is based on the statistics released by the Central Bank of Nigeria (CBN).

UBA ADS

According to the report obtained from CBN, the figure for March 30, 2020, represents a sharp decrease from the $41.85 billion that was recorded as at the end of third quarter of 2019.

The external reserves have maintained a downward trend since June 10, 2019, when it got to its peak of $45.175 billion.

[READ MORE: External reserves to fall below $30 billion, more forex restrictions expected)

GTBank 728 x 90

The drop in the country’s external reserves has been attributed to a couple of factors. The most critical has been the crash in crude oil prices globally, coupled with low demand. With oil being Nigeria’s main source of foreign exchange (contributes over 90%), this has become a major problem.

The other factors include huge demand for foreign exchange for imported goods which puts a lot of pressure on the external reserves and the coronavirus outbreak which has led to lockdown globally and travel restrictions. This has led to low demand for crude oil, as businesses and households are faced with shutdown and restrictions.

Due to pressure on the external reserves and the inability of CBN to sustain the pressure on the foreign exchange market, the apex bank adjusted the exchange rate to N380 per dollar and introduced uniform exchange rate in the market. It merged the official rate, the rate for Bureau De Change (BDC) operators, the investors and exporters window and some other rates.

Recall that just a few days before the introduction of these new policies, the CBN’s spokesperson, Isaac Okoroafor, had assured that the country’s external reserves were quite robust and comfortable and as such, the apex bank should be able to meet genuine demand for legitimate transactions.

He also recognized that due to lockdowns and travel restrictions globally, the demand for foreign exchange for imports, business travels, sporting events, travel for conferences and so on, had dropped drastically.

app

[READ ALSO: Why you should be worried about the latest drop in external reserves)

devland

The Monetary Policy Committee (MPC), at the end of its meeting in March, reiterated the need for government to vigorously pursue the diversification policy which has been a recurring topic of discussion among experts and reduce the reliance on oil revenue.

The CBN Governor, Godwin Emefiele, admitted that continuous decline in crude oil prices would lead to further reduction in the external reserves, reduced government revenue and weak aggregate demand. This will also adversely affect the non-oil receipts as well as infrastructural and security challenges.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- chike.olisah@nairametrics.com.

Click to comment

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Business News

Global oil market to re-balance in 2 months’ time

In the meantime, OPEC+ wants to keep the existing production output cuts beyond the June expiry date as part of efforts to rebalance the market. Countries like Saudi Arabia, the United Arab Emirates (UAE) and Iraq, have all reaffirmed their commitment to this effect.

Published

on

Crude oil prices, bonny light

With the uncertainty that still prevails in the global oil market due to the prevailing coronavirus pandemic, analysts have been coming up with different forecasts on the future of the market. The latest forecast is that the market will most likely recover by July 2020.

Crude oil prices and oil demand plunged over the past few months as a result of the pandemic. However, with the lifting of global lockdowns and gradual reopening of global economies, oil prices are expected to rebound. Russia’s energy minister, Alexander Novak, said the global oil supply and the oil demand will most likely rebalance by July.

UBA ADS

In the meantime, OPEC+ wants to keep the existing production output cuts beyond the June expiry date as part of efforts to rebalance the market. Countries like Saudi Arabia, the United Arab Emirates (UAE) and Iraq, have all reaffirmed their commitment to this effect.

In his analysis earlier today, OPEC’s Secretary-General, Mohammed Barkindo, urged OPEC+ members not to flout the output cut. According to him, OPEC+ members must remain committed to production cuts despite signs that oil demand is beginning to recover.

(READ MORE: Oil price gains likely to halt over demand uncertainty, as US-China tension intensifies)

GTBank 728 x 90

Global oil market to rebalance in 2 months’ time

On its part, Russia had agreed to cut down its oil production to 8.5 million barrels of crude per day in May and June, down from 10.5 million barrels.  There is a possibility that the country could extend the current level of output cut beyond June, a situation that is expected to serve as a major boost in the rebalancing of the oil market.

Last week, the International Energy Agency (IEA) said that it had seen signs that the oil market would rebalance quicker than originally expected after the United States and OPEC implemented the agreed output cut. The development came as a big relief to Nigeria because the rebound of oil prices and the rebalancing forecast will help reduce the country’s fiscal pressure and boost its revenue.

Note that the Brent crude and Bonny light crude sold for about $36 per barrel and over $33 per barrel respectively. These are above the revised budget oil benchmark of $25 per barrel for the 2020 budget.

app
Continue Reading

Business

LIRS further extends deadline for filing annual tax returns by one month

“We constantly debated what other measures could be taken as an organization to support individuals and businesses at this time, hence, the additional one-month extension from June 1, to June 30, 2020.” – Ayodele Subair

Published

on

LIRS further extends deadline for filing annual return by one month

The Lagos State Internal Revenue Service (LIRS) has again extended the deadline for filing of Annual Tax Returns from May 31 2020 to June 30, 2020.

This is part of the state government’s effort to provide relief to taxpayers in light of the economic impact of the Covid-19 pandemic. With this development, annual returns for individuals, both employees and self-employed persons, can be filed anytime before June 30, 2020.

UBA ADS

In a press release signed by Monsurat Amasa, the head of LIRS’ Corporate Communications Department, the agency urged taxpayers to take advantage of the magnanimity of the government and file their returns. The LIRS’ Executive Chairman, Mr. Ayodele Subair, explained the extension thus:

“As the Lagos State Government keeps abreast of global best practices in containing the Covid-19 pandemic and eases the effects of an economic downturn on taxpayers and residents of the State, LIRS had initially extended the deadline for filing annual tax returns for two months, from the statutory March 31st of every fiscal year to May 31, 2020.  

“We constantly debated what other measures could be taken as an organization to support individuals and businesses at this time, hence, the additional one-month extension from June 1, to June 30, 2020.”

GTBank 728 x 90

(READ MORE: COVID-19: Lagos issues new guidelines, considers full reopening of economy)

He further explained that taxpayers can file the annual returns from the comfort of their homes and offices using the LIRS eTax platforms. They can also generate assessment and payment schedule, and other tax administration matters on the same platform. Updates on business operations and alternative payment platforms are to be found on the verified handles, and the LIRS website.

Continue Reading

Companies

Podcast: How Covid-19 has birthed a new, vibrant digital economy

Published

on

Does Nigeria have a debt problem?, EMM podcasts

Join Adetayo Adesola, Lawretta Egba and Emmanuel Abara as they dicuss what sectors and industries will succeed and fail in a covid-19 world.

Listen to more podcasts

UBA ADS

GTBank 728 x 90
Continue Reading