Foreign Reserves Rise To $40.5 Billion As Oil Price Rebounds
Nigeria’s foreign reserves arrested a 10-week decline, rising to $40.5 billion by the close of business last week.
The foreign reserves rose by $12 million the Central Bank of Nigeria(CBN) 30-day moving average report released on its website at the weekend indicated.
The uptick in foreign reserves is associated with a corresponding rise in crude oil prices which equally had a positive effect on the naira exchange rates at the parallel markets.
Oil posted a fourth straight weekly gain, the longest winning streak since October 2021 on signs that the market is tightening as global consumption firmed up despite the impact of the new variant of COVID-19 known as Omicron.
Crude has clawed back most of its losses late last year that was driven by Omicron, with Brent Crude rallying to $86.06/per barrel over the weekend.
“The picture for oil is getting better because people are looking past the omicron variant and looking to reopen businesses much like we saw coming out of August,” said Rob Haworth, Senior Investment Strategist at U.S. Bank Wealth Management.
With a pick in crude oil prices, the naira held relatively firm against the dollar, appreciating slightly to N570/$1 compared to the N571/$1 it closed a week earlier.
In a report to investors titled: ‘Naira buoyed by upgraded growth and reserves’ Trading Desk Manager, AZA, a global forex dealer, Murega Mungai, said he expected the naira exchange rate to remain firm in the near term given the support of higher reserves levels.
Another positive news for the economy came from the World Bank, which projected that Nigeria’s economy would grow by 2.5 per cent this year, up from the previous estimate of 2.4 per cent, driven by higher oil prices.
The National Bureau of Statistics (NBS) recently said that real Gross Domestic Product (GDP) grew by 4.03 per cent (year-on -year) in the third quarter of 2021, compared with 5.01 and -3.62 per cent in the second quarter of 2021 and third quarter of 2020, respectively.
The growth trajectory has thus been positive in the last four quarters following the exit from the recession in 2020. Quarter-on-quarter, real GDP grew by 11.07 per cent in the third quarter of 2021 compared with -0.79 per cent in the preceding quarter.
This improvement in real GDP was driven by growth in both the oil and non-oil sectors by 12.05 and 10.99 per cent, respectively.
Of equal significance is the continued moderation in headline inflation (year-on-year) to 15.4 per cent in November 2021 from 15.99 per cent in the previous month, the seventh consecutive month of decline.
Inflation, however, remained above the CBN’s implicit tolerance corridor of six to nine per cent and above its benchmark policy rate of 11.5 per cent despite its progressive decline.
The Capital Adequacy Ratio (CAR) and Liquidity Ratio (LR) both remained above their prudential limits at 15.2 and 41.2 per cent, respectively.
The Non-Performing Loan ratio (NPL) at 5.3 per cent in October 2021, reflected progressive improvement, compared with 5.7 per cent in October 2020.
Analysts urged the CBN to sustain its tight prudential regime to bring the Non-Performing Loan (NPL) ratio below the five per cent prudential benchmark.
