The country’s external reserves lost $207.7 million in the first two weeks of this month as a result of decline in crude oil prices.
Latest figures obtained from the Central Bank of Nigeria yesterday showed that the reserves, which stood at $33.23 billion on June 30, dropped to $33.09 billion as of July 12 before gaining slightly to rise to $33.1bn on July 16.
However, crude oil rose by more than three percent yesterday to above $69 a barrel, signalling a rebound from the near two-month lows of near $65 as risk appetite improved despite an unexpected increase in US crude stock.
Brent crude futures rose to $72.3 a barrel on Wednesday, extending a recovery from Monday’s 6.8 per cent selloff that drove prices to 2-month lows.
The decline in the external reserves was largely attributed to the fall in crude oil prices in the days leading to the decision of the Organisation of Petroleum Exporting Countries and allies (OPEC+) to up crude oil output.
The reserves lost $905.5 million in June after it fell to $33.32 billion at the end of June 30, from $34.23 billion on May 31.
Recall that crude oil which had risen to a three-year high of $77 per barrel plunged to below $65 per barrel following OPEC+ decision to increase oil output by 400,000 million barrels per day starting from next month.
API figures on Tuesday showed US crude stocks increased by 0.806 million barrels in the week ended July 16, the first rise since May.
OPEC+ decided on Sunday to increase overall crude production by 400,000 barrels per day on a monthly basis starting August 2021 until phasing out the 5.8 million bpd production adjustment.
At the same time, soaring coronavirus cases in the US, Europe and Asia threaten demand recovery.
Nigeria’s current reserve is among the poorest of the oil-producing countries. For instance, it is less than 10 per cent of that of Saudi Arabia, world’s leading oil-producing nation, in nominal terms. The real disparity is even wider when the populations and import values of the two countries are compared.
With a population of 35.3 million, Saudi Arabia’s foreign exchange (FX) reserve per capita is over $12,000 while Nigeria’s is about $169, though the imports of the Arab nation far outweigh that of Nigeria with its 2019 yearly imports standing at $144 billion as against Nigeria’s $55 billion.
Other oil-producing countries such as Kuwait, Libya, United Arab Emirates (UAE), Iraq, Iran and Qatar are ahead of Nigeria in both real and nominal reserves.
With respective forex reserves values of $54.1 billion and $40.3 billion respectively, South Africa and Egypt, which are Nigeria’s regional economic rivals, are way ahead in nominal terms.
Interestingly, the two countries are not near Nigeria in terms of population and growth in imports, implying that they have given Nigeria a much wider margin in real terms.
On a global scale, Nigeria currently ranks 53rd as the country has dropped further down, below Morocco and Kazakhstan, whose reserves were previously below Africa’s biggest economy.
Nigeria’s romance with a nose-diving foreign reserves began in August 2008 (at a time the country’s import was less than what it is today) when it hit an all-time high of about almost $64.8 billion.
Data from the National Bureau of Statistics (NBS) revealed that the country’s import value as of quarter one (Q1) of this year was N6.85 trillion (or $16.7 billion).