Tony Chukwunyem 
Although Nigeria’s external reserves have maintained an upward trend in the last few weeks, they are likely to remain under pressure for the rest of the year unless the Federal Government quickly introduces structural reforms to boost foreign exchange supply in the country, analysts at CSL Research have said.
The analysts, who stated this in a report released yesterday, pointed out that while the price of oil-the commodity that accounts for the bulk of Nigeria’s forex earnings- has been high in recent years, the country had not fully benefit from this as a result of “declining production figures caused by crude oil theft and deteriorating oil infrastructure.”
They also noted that although the Tinubu administration, which came into office in May last year, had introduced several policies, including FX rate unification across various windows in its bid to ensure exchange rate stability and create a more transparent FX market, “foreign exchange pressures persist, leading to the continuous depreciation of the naira.”
The report reads: “Based on figures obtained from the Central Bank of Nigeria (CBN) the movement of external reserves as of May 16 2024, there was a notable increase of $0.54 billion in the nation’s external reserves, rising to $32.64 billion after a decline of $2.28 billion in a single month between March 18 and April 19, 2024, which initially was widely believed to have occurred due to the CBN’s ongoing efforts to stabilise the naira.
“However, the CBN Governor, Mr. Olayemi Cardoso, at the International Monetary Fund Spring Meeting held in Washington DC last month, refuted the claim, asserting that the decline was due to the partial repayment of debts owed to creditors. He further expressed the apex bank’s desire to minimise its involvement in the FX market. “Though other sources like foreign remittances, foreign currency loans, and yields from foreign assets contribute to the external reserves, crude oil sales receipt is the primary inflow source.
Oil prices have been high in recent years, influenced by the impact of the Russia-Ukraine crisis on the global energy market. “However, Nigeria has failed to fully benefit from this due to declining production figures caused by crude oil theft and deteriorating oil infrastructure.
“Additionally, delayed subsidy elimination resulted in increased subsidy payments as refined petroleum landing costs surged alongside rising crude prices. “To address FX liquidity issues, the Tinubu administration has introduced several policies, including FX rate unification across various windows, aiming to narrow the gap between the official and black-market rates and create a more transparent FX market.
“Despite these measures, however, FX pressures persist, leading to the continuous depreciation of the Naira. Without urgent structural reforms on the fiscal front to augment FX supply, the country’s reserves will likely be pressured for the rest of the year despite the slight increase observed,” he added.
