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Emefiele: External reserves to surpass $42bn by mid-2022

The Central Bank of Nigeria (CBN) has projected that the country’s external reserves could surpass $42billion by June next year from the $41.5billion in Q3’ 2021. Governor of the apex bank, Mr. Godwin Emefiele, who disclosed this in his presentation at the Chartered Institute of Bankers of Nigeria (CIBN) 56th annual Bankers Dinner, in Lagos yesterday, said that the CBN was also expecting that the reserves: “Would be at relatively comfortable levels with expectation of sustained trend of current crude oil price, the impact of Eurobond Issuance, and stable exchange rate condition.”

As Emefiele put it: “Based on in-house analysis and simulations, external reserves could surpass US$42 billion by mid-2022 from the US$41.5 billion in 2021q3, based on the dynamics of oil price and FX demand for import. Generally, external reserves is expected to be at relatively comfortable levels with expectation of sustained trend of current crude oil price, the impact of Eurobond Issuance, and stable exchange rate condition.” According to the CBN Governor, the external reserves, which currently stand at over $41.4bn are enough to support 9 months of imports. He noted that the regulator’s demand management policy, as well as support from the successful issuance of the $4bn Eurobond and the IMF SDR, have bolstered the reserves stating that: “ This is not just a morale booster for both foreign direct and portfolio investors willing to invest in the economy, but it provides significant fire power to support our domestic industries that need to import critical machines and equipment for domestic production and exports.”

He also pointed out that the apex bank’s demand management policy has led to the naira remaining largely stable around N411/US$1 at the Investors and Exporters (I&E) window especially since the discontinuation of FX allocation to Bureau De Change operators, in addition to facilitating the convergence between the CBN and NAFEX rates. In addition, Emefiele disclosed that as a result of the CBN’s policies: “Banks are now able to meet the demands of their customers seeking forex for SMEs, school fees, medical and PTAs, which has reduced the need of customers to rely on alternative providers of foreign exchange. Average daily Fx turnover at the I&E window is now over $250million, up from $40million in April 2020.

“Our current account deficit has narrowed significantly, from a huge deficit of 4.53% of GDP in the 4th quarter of 2020 to negative 0.44% of GDP in the 2nd quarter of 2021 due to a surplus position in the goods account. The surplus position in the goods account is due to a reduction in imports, increase in crude oil and gas export receipts, and improvement in remittance inflows. Remittance inflows have been supported by our naira for dollar program, and we have seen a surge in remittance inflows from over $5m per week in June 2020 to over $100m per week in October 2021.”

On the CBN’s outlook for 2022, Emefiele, said that although uncertainties remain around the mutating Delta virus, prospects of a broadbased economic recovery in Nigeria remain bright as efforts are made to improve access to vaccines for Nigerians, in addition to measures aimed at implementing safety protocols to curb the spread of the virus.

Specifically, he stated: “As a result of these growth enhancing policy measures, we project that GDP will grow at 3.0 percent for 2021 up from -1.8 percent in 2020. Inflation is expected to continue on its downward trajectory into 2022 as continued interventions along with the onset of the harvest season aid improved supply of food items, which would further help to decelerate inflationary pressures.”




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