ABUJA (CU)_Over the past year, amid pandemic-induced border closures and government-imposed lockdown, there was a continuous decline in crude oil sales globally. This was further exacerbated over the past few months as India, one of the world’s largest oil importers, was experiencing the deadly second wave of COVID-19 which killed an average of nearly 400,000 patients a day.
Nevertheless, things appear to be improving now, with some of the most developed economies beginning to recover from the global health crisis. This was reaffirmed by the positive rally recorded in the global crude oil market, with Brent crude trading at $73.5 per barrel. Moreover, reports claim that India’s oil imports are also beginning to pick up after months of lessened activity. Yet, Nigeria, one of the largest crude oil exporters to the South Asian nation, continues to record a downward trend in its forex reserves.
Over the past week, Nigeria’s external reserves tumbled to a 13-month low of $30 billion. Last Thursday (17 June), this figure declined by 0.09 per cent from the previous day to $33.79 billion. According to reports, the West African nation has lost a total of $1.58 billion in reserves year-to-date, as the country’s financial market hardly reflects the marginal gains in rising oil prices in recent months. Figures published by the Central Bank of Nigeria (CBN) showed that during the first 10 days of this month, reserves fell by $222.3 million to $34.0 billion. The last time the figure reached this mark was between June and July of 2017.
Therefore, it is apparent that as the crude oil market continues to record a positive rally, Nigeria’s reserves remain among the poorest of the oil-producing countries. For instance, if we compare with the world’s largest oil-producing country Saudi Arabia, Nigeria’s reserves are less than 10 per cent of the Middle Eastern nation. The disparity is even broader in terms of per capita reserves of the two countries. With a population of more than 35 million, KSA’s forex reserves per capita is over $12,000, while this figure in Nigeria stands at about $169.
Nigeria is also behind many other oil-producing countries, including Kuwait, UAE, Libya, Qatar, Iraq and Iran, in both real and nominal reserves. Therefore, it comes as no surprise that the West African nation currently ranks as the 53rd on a global scale, as it dropped past Kazakhstan and Morocco, two countries whose reserves were previously below Africa’s largest economy.
As this downward trend in external reserves continue, experts warn that this could leave the Nigeria’s battered economic outlook worse, since the size of the reserves significantly influence the confidence of foreign investors. On the other hand, considering the fact that the country’s value of imports in the first quarter of this year was at N6.85 trillion (or $16.7 billion), the current reserves can only fund six-months of imports. This, according to experts, would put an enormous pressure on the CBN’s capacity to stabilise the troubled Naira.
Meanwhile, India, still recovering from the deadly second wave of COVID-19, reached an all-time high of $605 billion in external reserves earlier in the month, which provides an import cover for about 15 months. Nevertheless, some claim that this amount does not provide a sufficient buffer, particularly considering the current reserves of regional rival China, which is sufficient to clear import bills of about 16 months. Japan, as another developed economy in the region, has reserves sufficient to last for 22 months.
