Tony Chukwunyem 
…surge linked to $1.25bn raised via Eurobond
Nigeria’s external reserves may have halted its recent downward trend as it rose by $31.68million between March 23 and March 29, 2022, latest data from the Central Bank of Nigeria (CBN) shows. According to the data, the reserves increased from $39.52 billion on March 23 to $39.55billion on March 29. New Telegraph had recently reported that despite higher oil prices, occasioned by Russia’s invasion of Ukraine on February 24, the country’s external reserves dropped by $280.66milllion to $39.52billion on March 23, 2022 from $39.800billionon March 7. Analysts had attribute the decline in the CBN’s dollar buffers to Nigeria’s inability to meet its OPEC quota in oil output due to security and other challenges in the oil producing regions of the Niger Delta as well as increased forex sales by the apex bank. In a recent report, analysts at Financial Derivatives Company (FDC) predicted that the $1.25billion that Nigeria raised through Eurobonds a fortnight ago could push the country’s external reserves up to $40billion.
They, however, said the Eurobond borrowing boost for the external reserves would be “temporary.” One of the big three credit rating agencies, Fitch Ratings, in its latest report on Nigeria, stated that higher global oil prices will drive an improvement in the country’s external liquidity and support near-term economic growth, adding, however, that “these improvements are balanced against high hydrocarbon dependence, which leaves Nigeria vulnerable to negative oil price shocks, and structurally low domestic revenue mobilisation.” Specifically, the agency stated that “Nigeria’s gross international reserves have been bolstered by higher oil export receipts, which will continue in 2022.
“We forecast reserves to increase to $43 billion in 2022, up from $40.5 billion at end-2021. We estimate that the combination of oil exports and remittance inflows helped to bring the current account (CA) into balance in 2021 after a deficit of 4.2 per cent of GDP in 2020. Our baseline assumption is for the CA balance to remain broadly unchanged in 2022, but sustained higher oil prices at their present level of USD112 per barrel could widen the 2022 current account surplus to four per cent of GDP, with upside to Nigeria’s international reserves.
