Bullish crude oil pushes Nigeria’s foreign reserve to $39.6 billion

Nigeria’s foreign reserve recorded a rare appreciation in April 2022, gaining $32.52 million in the month to close at $39.58 billion as of the end of the review month.

The external reserve increased by 0.08% from $39.55 billion recorded as of 31st of March 2022. This is according to data obtained from the Central Bank of Nigeria (CBN).

Nigeria’s external reserve which had recorded consecutive reductions in the past five months witnessed its first monthly increase since October 2021, when Nigeria secured a $4 billion Eurobond and a $3.35 billion SDR allocation from the International Monetary Fund (IMF).

The uptick in the reserve level could be attributed to the bullish run in the crude oil market. Benchmark oil, brent crude recorded a 2.3% increase in price to close the month of April at $107.14 per barrel, following a 6.9% gain recorded in the previous month.

The reserve level had trended downwards in recent times due to the continuous intervention by the central bank in the official forex market, as means to curb exchange rate volatility and ensure stability of the naira. As an example, the apex bank supplied a sum of $1.98 billion to the interbank in 2021.

Also, a sum of $2.77 billion was supplied to Bureau De Change operators in the country between January and June 2021, before the ban on FX sales to the BDC, while $13.29 billion was supplied by the CBN to the Investors and Exporters window, SME, and the Invisibles.

Naira grew weaker in April

Despite the intervention by the apex bank, the exchange rate at the official market depreciated by 0.7% in April 2022, closing at N419/$1 as of the end of the month, compared to the N416.17/$1 recorded in March 2022. A sum of $2.57 billion was traded at the official I&E window in the review month.

In the same vein, the exchange rate at the parallel market also depreciated by 0.5% to close the month at N590/$1, while at the peer-to-peer market naira closed at N591.2/$1 in the month under review.

What you should know about foreign reserve

  • Foreign reserves are assets held on reserve by the central bank of a country used to back liabilities and influence monetary policy.
  • They include foreign banknotes, deposits, bonds, treasury bills and other foreign government securities.
  • These assets serve many purposes but are most significantly held to ensure that a government or its agency has backup funds if their national currency rapidly devalues.
  • Foreign exchange reserves are also called international or external reserves.

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