External Reserves Dip By 20.9% As Oil Falls Below $50

In the face of the declining oil price, which went below $50 for the first time in six years, Nigeria’s foreign reserves have dwindled by 20.9 per cent within the past year.

External reserves which stood at $43.5 billion at the beginning of 2014 dropped to $34.49 billion by December 30, 2014, according to latest figures made available by the Central Bank of Nigeria (CBN).

The reserves, which had begun a steady decline since October, had dropped by 12.7 per cent compared with what it was by September 30, 2014. The value of the local currency started out the first business day of the year on a negative note as the value dropped at the interbank market.

According to the British Broadcasting Corporation (BBC), the US oil price has fallen below the symbolic threshold of $50 a barrel for the first time in six years.

“The price of Brent crude also fell on Monday (yesterday), dipping more than 6 per cent to trade at below $53 a barrel,” said the report. The price of both Brent crude and US oil, known as West Texas Intermediate crude, have now lost more than half of their value since mid-2014.”

According to the BBC, investors are worried that a combination of a global supply glut and weak demand could cause prices to tumble further.

On the other hand, naira sold at N185 to the dollar and official rates from the apex bank stood at N168 to the dollar.

The CBN had, as part of measures to keep the exchange rates stable, intervened rigorously at the deleting exchange market last week and has sold less foreign exchange at its twice weekly retail Dutch auction in recent weeks.

At the money market end, bond yields all faced downwards even as the Nigeria Inter Bank Offer Rates (NIBOR), asides the overnight rate, all trended downwards.

Source: Leadership