Nigeria’s economy gets a boost as reserves hit $47.8bn


*Currency in circulation drops to N1.96trn

The Nigerian economy has continued to improve, while further efforts to address remaining gaps by both the monetary and fiscal authorities have been encouraged by local and international financial stakeholders, even as the nation’s foreign external reserves appreciated to $47.804billion as at Monday, May, 2018.

Also, latest statistics from the Central Bank of Nigeria (CBN) showed that currency in circulation dropped by 4.02 per cent to N1.96 trillion in April. The apex bank on its official website said currency in circulation in March was N2 trillion, which represented the highest figure so far in 2018.

Although, the International Monetary Fund (IMF) believed that the Nigeria’s economy remained vulnerable after exited from its worst recession in 25 years, economists are confident that the most populous African nation’s recovery can take momentum into stronger economic growth in 2018, even as its foreign reserves continued to grow, inflation slowing down continuously and stability in the foreign exchange market.

Nigeria fell into recession in 2016 largely due to low crude oil prices, but emerged from recession in the second quarter of last year as crude prices recovered and militant attacks against Niger Delta oil production facilities ended.

But the largest economy in Africa consolidated its ongoing recovery in fourth Quarter (Q4) 2017, as real Gross Domestic Growth (GDP) expanded by a strong 1.9 per cent year- on- year (y/y), the highest quarterly growth since (Q4) 2015.

However, the latest figure indicated that the foreign reserves continued on a steady increase in 2018, attributable to increased global oil prices and stable production that continued to shore up the reserves and support the CBN’s interventions in the market.

The foreign reserves gained $1.24 billion or 2.67 per cent in April to close at $47.49 billion from $46.26 billion it opened in April. The foreign reserves monitored by CBN appreciated by $7.44 billion in first quarter of 2018. The external reserves opened this year at $38.77 billion to close on March 28, 2018 at $46.21 billion, an increase of 19.2 per cent this year.

Meanwhile, the apex bank on its official website said currency in circulation was N2 trillion in March, the highest so far this year. The apex bank said for last month, currency in circulation was at N1.94 trillion while in January, it opened at N1.945 trillion from N2.15 trillion in December 2017.

Findings by our correspondent revealed that N2.15 trillion reported by CBN was the highest naira in circulation reported in 2017. The CBN’s economic report for fourth quarter of 2017 had disclosed that, “at N2.15 trillion, currency-in-circulation rose by 21.1 per cent, above the level in the third quarter of 2017. The development reflected the growth in currency outside banks.

“Total deposits at the CBN amounted to N13.17 trillion, indicating 7.5 per cent increase over the level at the end of the third quarter of 2017. The development was as a result of the rise in the deposits of banks, Federal Government and the “Others” in the review quarter.

The IMF in its 2018 Article IV consultation with Nigeria noted that the Nigerian economy is exiting recession but remains vulnerable. “New foreign exchange measures, rising oil prices, attractive yields on government securities, and a tighter monetary policy have contributed to better foreign exchange availability, increased reserves to a four-year high, and contained inflationary pressures.

Economic growth reached 0.8 percent in 2017, driven mainly by recovering oil production. Inflation declined to 15.4 percent year-on-year by end-December, from 18.5 percent at end-2016. “Reforms under the government’s Economic Recovery and Growth Plan have resulted in significant strides in strengthening the business environment and steps to improve governance”, the IMF stated.

It further noted that all these factors have not yet boosted non-oil non-agricultural activity, brought inflation close to the target range, contained banking sector vulnerabilities, or reduced unemployment.

A higher fiscal deficit driven by weak revenue mobilization amidst still tight domestic financing conditions has raised bond yields, and crowded out private sector credit. Higher oil prices are supporting the near-term projections, but medium-term projections indicate that growth would remain relatively flat, with continuing declines in per capita real GDP under unchanged policies. Just last week, the CBN in its capacity to continue to sustain the foreign exchange intervention, injected the sum of $210 million into the inter-bank Foreign Exchange market in continuation of its efforts to sustain liquidity in the market.

The apex Bank last Wednesday offered the sum of $100 million to authorized dealers in the wholesale segment of the market. The Small and Medium Scale Enterprises (SMEs) segment received the sum of $55 million while the sum of $55 million was apportioned to invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA). A statement from the Bank’s Acting Director, Corporate Communications Department, Mr. Isaac Okorafor, confirmed the figures. Okorafor urged Deposit Money Banks to continue to honour requests from customers with genuine needs, noting that the Bank will continue to sustain liquidity in the foreign exchange market.  In fact, financial experts believed that the 50 billion dollars reserve target by the CBN in 2018 is achievable.

The Daily Times recalls that the CBN Governor, Mr. Godwin Emefiele, had expressed optimism that the nation’s foreign reserves would grow to 50 billion dollars before the end of the year. He said that the economic recovery would consolidate as the sentiments improved in the macro economy and supported by proactive monetary, trade, industrial and fiscal policies.

The governor also said the apex bank expected a continued uptick in Gross Domestic Product (GDP) growth with a positive spillover to the improved unemployment rate. On the foreign exchange market, he said the rate stability would continue. “As we entrench and sustain the transparency in the FX market, as foreign FX reserves accretion continues, market confidence and improved sentiments remain.

“We expect that the exchange rate will not only be stable but would begin to appreciate against major currencies. “The adverse competitiveness outcome which such appreciation may entail will be adequately mitigated by proactive policies to ensure that our balance of payments position is not undermined.”

According to him, there is also need for strong policy coordination. “Finally, we expect a re-doubling of strong policy coordination, collaboration and cooperation which flourished during the very difficult times,” he added. ( Daily Times)

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