By Dipo Olowookere
Figures obtained from the Central Bank of Nigeria (CBN) have revealed that the country’s foreign reserves rose by $825 million in November, 2016.
Recall that Nigeria’s foreign reserves had been under severe pressure before the introduction of the flexible foreign exchange regime, which allows the exchange rate to be determined by supply and demand.
Before then, the heavy demand for the US Dollar weakened the Naira, Nigeria’s local currency, and caused the foreign reserves to keep draining.
At the moment, the Naira is almost exchanging at N500 to a Dollar at the parallel market.
From the figures obtained from the CBN on the movement in reserves, on November 1, the gross foreign reserves stood at $24 billion and by November 30, it had risen to $24.8 billion, indicating an increase of $825 million or 3.45 percent.
Meanwhile, this growth has been described as “a rare increase in reserves.”
According to analysts at FBNQuest, an investment banking and research arm of FBN Holdings, the “CBN data show that gross official reserves picked up by $820 million in November on a 30-day moving average basis to $24.8 billion. The monthly average movement has been an outflow of $430 million over the past 12 months.”
“This first sizeable increase since July 2015, when the FX holdings of public bodies were transferred to the CBN, is apparently due to the disbursement of US$600m by the African Development Bank (AfDB) in the form of budget support,” it said, adding that, “We do not see another inflow on this scale until Q1 2017, when the sovereign Eurobond is due to be launched.”
“The reserves may appear comfortable according to one traditional measure: on the basis of the balance of payments for the 12 months through to end-June, they provided cover for 6.6 months’ merchandise imports and for 4.6 months when we add services,” FBNQuest submitted.
According to International Monetary Fund (IMF), foreign reserves consist of “official public sector foreign assets that are readily available to, and controlled by the monetary authorities, for direct financing of payment imbalances, and directly regulating the magnitude of such imbalances, through intervention in the exchange markets to affect the currency exchange rate and/or for other purposes.”
