President Muhammadu Buhari’s directive to the Central Bank of Nigeria not to provide foreign currency for food imports was a panic response to declining foreign reserves and inflows, Metrostarng has learnt.
The reserves dropped by $482.18m from N45.14bn as of July 8 to $44.65bn as of August 8, latest statistics from the Central Bank of Nigeria have shown.
The reserves which had maintained a steady rise in recent months have started suffering decline, thus leading to panic button n the Buhari administration.
A research by FSDH noted in its monthly economic and financial markets outlook with the theme, ‘Easy money: time to create buffers’ for the month of August that this could be linked to fall in oil prices.
Part of the research read, “The average price of Bonny Light in July 2019 stood at $66.24/b compared with the average of $66.52/b in June. “However, in the last few days, crude oil price has dropped below $60/b as a result of trade tensions between United States and China which have impacts on the global economy.
“This may have negative impacts on revenue and other key prices in Nigeria. “The external reserves continued on its downward trend in July 2019. The decrease in the external reserves may be attributed to lower crude oil prices and lower Foreign Portfolio Investors inflows.”
In recent months when the reserves enjoyed some growth, the Central Bank Governor, Godwin Emefiele, had said, “External reserves have recovered significantly from $23bn in October 2016 to over $43bn as of December 3, 2018. “While the drop in our export earnings arising from our reliance on crude oil exposed the fragility of our domestic economy in 2016, it also reinforced the view within the CBN and the Bankers Committee on the need to revise our growth strategy as a nation.”
With crude oil as a major source of the country’s foreign exchange, he said, the nation’s economy became sensitive to fluctuations in the price of crude oil.
“Significant declines in the price of crude oil not only reduced Nigeria’s export earnings, the nation was also subjected to higher inflation and lower growth, given our dependence on imported goods,” he said. With the discovery of shale oil, along with policy measures supporting alternative energy, he added, it had become imperative to build buffers against volatility.
Emefiele said this could be achieved by improving on company productivity, reducing dependence on imported goods and increasing export of non-oil goods and services.