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External Reserves Stage Recovery, Rises by $1.030b in One Month

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Nigeria’s beleaguered foreign reserves seems to be gradually regaining its upswing as it rose by $1.030 billion in the last one month to close at $38.136 billion at the weekend.

This represents an accretion by 2.8 per cent, compared to the $37.106 billion it stood as at June 10, 2014.

Most analysts attributed the development to the appreciation of crude oil prices in the international market. In addition, some noted that the moderate demand for the US dollar observed at the central bank’s regulated Retail Dutch Auction System (RDAS) was also influencing the gradual build up of the reserves.

Data gathered from the central bank showed that the current value of the reserves which is mostly derived from crude oil earnings is the highest in the last two months.

In the New York Mercantile Exchange, West Texas Intermediate crude oil for delivery in August traded at $101.00 a barrel at the weekend, while Brent oil futures for August traded at $106.701 a barrel, while the spread between the Brent and US crude contracts stood at $5.70 a barrel.

The Chairman, Lagos state branch, Chartered Institute of Bankers of Nigeria (CIBN), Mr. Bolade Agbola pointed out that the CBN governor’s agenda of maintaining price stability would help in the forex reserves accretion.

“The CBN governor has said that one of his goals is to ensure that the forex is stable. There are so many advantages in that. It allows forex inflow. That is why all central banks across the world, one of their main objectives is to maintain price stability and when you are talking about price stability you are talking about the pricing variables.

“The challenge the naira was facing was as a result of the recovery of advanced economies. Many investors came to Nigeria for higher yield investments and had an incentive to repatriate their money to go back and invest. But the only way to minimise that is to defend the naira which I think is what the CBN has been doing in the last few years,” he said.

Furthermore, the CIBN boss stated that the sustained crude oil production by the country would also support the growth of the forex reserves.

“The global oil market is not doing badly and we have been trying as a nation to sustain production as an export-oriented country. Government is also making efforts to improve non-oil exports,” he added.

Concerned by the perennial depletion of the foreign exchange reserves, the central bank recently announced new capital requirements for the licensing of Bureau De Change (BDC) operators in the country.

Part of it included a new minimum capital base of N35 million, up from the N10 million it was previously.

Article Credit: Thisdaylive

Updated 4 Years ago

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Tags:     Nigeriaís beleaguered foreign reserves     RDAS     Mr. Bolade Agbola