Nigerian Foreign Reserve Holds Back on Steep Depletion

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CEM REPORT | The steep depletion of the Nigerian foreign reserves observed over the last two months has shown some flattening in the last days

According to the data obtained from the Central Bank of Nigeria, the nation’s foreign reserves lost US$7.44 million between May 30 and June 2 compared to the US$141.64 million lost within the same preceding period.

Between June 2 and June 6, the foreign reserve depleted   by US$54.2 million. This amount to a combined depletion of US$69.08 million between May 30 and June 6.

The Nations foreign reserve stood at US$38.625 billion as at May 24, fell to US$38.484 billion as at May 30 before depleting slightly further to US$38.476 billion as at June 2. As at June 6 according to CBN data, the reserve has fallen further to US$38.422 billion

However, Reserve has witnessed a drastic erosion within the last two months with the figure falling from US$39.812 billion on April 21 to the current figure of US$38.476 billion as at June 2 losing a whooping sum of US$1.335 billion within the period.

According to Alex Anameje, Chief Analyst at Continental Economy Magazine, the slight flattening of the curve in the depletion has been attributed to the bullish crude oil market witnessed in April. Brent crude was reported to have increased by 2.3% to close at 107.14 per barrel in April 2022.

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This follows Gabriel Imomoh’s analysis with respect to the dependence of Nigeria on crude oil as the major source of foreign exchange. He though corroborated Anameje’s view that the rising price of crude in the international market had impact on the reserve, he however looked at the big picture with respect to the general poor performance of the nation’s foreign reserve.

Imomoh said that the dwindling oil production in Nigeria below its OPEC quota has had a tremendous impact in the reserve. The nation currently produce oil at 1.354mbd against the 2.1mbd we produced in the recent past.

The reasons are known to be sabotage and oil theft which has discouraged investment in the sector by oil companies and forcing an exit of major ones. It therefore means that our earnings have reduced drastically while our spending is heightening.

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