Foreign reserves gain $7b in six months to $31b
The foreign exchange reserves rose by $7 billion in six months to hit $31 billion at the end of last month.
The increase has restored the total to a level last seen in August 2015.
According to FBN Capital Research, the reasons for the recovery are the disbursement of $600 million by the African Development Bank (AfDB) last November and the recent sale of N1.5 milion Eurobond.
“There has also been a significant recovery in oil production over the period. With less certainty we can speculate about improved forex management and possible swap transactions,” it said.
The research firm said the positive surprise was due to the upward swing in reserves, since the Central Bank of Nigeria (CBN) stepped up its forex sales in early March.
“The steady accumulation makes it less, not more, likely to adopt the forex reforms sought by the market. There is no sign that the CBN plans to slow its sales, which for wholesale transactions alone are close to $3 billion: rather, it launched its latest window (for investors and exporters) only last month,” the report said.
It said the macroeconomic damage from the latest period of oil price weakness, which is approaching three years, could have been manageable if a fiscal buffer against external shocks had been functioning.
“Legislation passed in 2011 created such a buffer, Nigeria’s own ring-fenced sovereign wealth fund, but the opposition of state governors has prevented its effective operation. The accumulation from 2011 through to the start of the oil price slide in August 2014 would have been substantial,” it added.