At $33bn, External Reserves Hit 31-month High, Oil Rebounds to Five-month High

Nigeria’s foreign exchange reserves have risen to a 31-month high of $33 billion, the Central Bank of Nigeria (CBN) disclosed yesterday.

It was also positive news for Nigeria from the oil markets where crude prices touched a five-month high, with Brent, the benchmark crude, up one per cent at $55.72 a barrel, after a session high of $55.99, its highest since April 13.

CBN spokesman Mr. Isaac Okoroafor spoke on the rise in foreign reserves on the sidelines of a seminar for finance correspondents and business editors in Awka, Anambra State yesterday.

The accretion in reserves, derived mainly from the proceeds of crude oil earnings, represents an increase by $7 billion, compared with the $26 billion at the end of the year.

The Nigerian economy, which recently exited from a debilitating recession, with data from the National Bureau of Statistics (NBS) showing that the economy expanded by 0.55 per cent in the second quarter (Q2) of 2017, was driven mainly by the performance of the oil and three other sectors.

In the second quarter, the oil sector grew significantly by 17.04 percentage points from -15.40 per cent recorded in Q1 2017 to 1.64 per cent, reflecting the relative peace in the Niger Delta, increased oil output from the region and increase in oil prices.

In the foreign exchanges market, however, the naira closed at N360.5 to the dollar on the NAFEX window yesterday, but fell to N367 to the dollar on the parallel market.

The CBN on Monday had intervened with $250 million in the interbank forex market.

Okorafor said with the sustained interventions, the central bank has been able to push forex demand away from the parallel market into the formal regulated market.

According to him, CBN had taken measures to check the activities of speculators and shield the currency from attacks, while also maintaining the value of the naira.

Okorafor maintained that authorised dealers had enough funds to meet the forex needs of customers and urged all to adhere to the extant guidelines on the sale of forex in the Nigerian forex market.

He advised those in genuine need of forex to continue to approach their respective banks for purchase, adding that the CBN remained optimistic that the Nigerian currency will fare strongly against other convertible currencies.

On the convergence target of the Bank, he said the goal would be attained if all stakeholders played by the rules.

On the international oil markets, crude oil prices rose yesterday, with the global benchmark crude, Brent, touching a five-month high, a day the International Energy Agency (IEA) predicated that the oil market would continue to tighten as fuel demand increases.

Brent crude was up one per cent at $55.72 a barrel, after a session high of $55.99, its highest since April 13, while the U.S. West Texas Intermediate was up 1.7 per cent at $50.14 per barrel, its first time to cross the $50 mark since August.

WTI touched $50.50, its highest since May 25, and surpassed its 200-day moving average.

Reuters reported that Brent has climbed more than $10 a barrel in three months and is close to where it began this year.

On Wednesday, the IEA raised its estimate of 2017 world oil demand growth to 1.6 million barrels per day (bpd) from 1.5 million bpd.

The agency said a global oil glut was shrinking thanks to strong European and U.S. demand, as well as production declines in OPEC and non-OPEC countries.

Global oil demand grew “very strongly” year-on-year in the second quarter this year, which prompted the IEA to revise up its growth estimate to 1.6 million bpd for this year.

This is the second consecutive month in which the agency has lifted its demand growth forecast, after it revised up the growth estimate to 1.5 million bpd in August.

Although Hurricanes Harvey and Irma were expected to slow U.S. oil demand growth in the third quarter this year, “OECD demand growth continues to be stronger than expected, particularly in Europe and the U.S.,” the IEA said.

Also supporting oil prices, was the fact that OPEC production dropped in August for the first time in five months, following production disruptions in Libya and other OPEC members producing less crude.

OPEC members bound by the pact achieved an 82 per cent compliance rate in August, higher than the 75 per cent in July.

IEA noted that year-to-date, compliance within OPEC stands at 86 per cent.

OPEC and other producers including Russia had agreed to reduce crude output to support prices.

This week’s gains have come despite data showing a big build up in U.S. crude inventories after Hurricane Harvey.

Data from the Energy Information Administration showed a build up in U.S. crude inventories last week of 5.9 million barrels, exceeding expectations.