Nigeria’s foreign reserves will be completely exhausted in four years time if the current depletion rate persists.
The Nigerian external reserves status has become a national emergency, having been on a free fall for well over half a year now, statistics from the Central Bank of Nigeria says.
It is worrisome that the future of oil, Nigeria’s primary foreign exchange earner, is weak and bleak at the same time, no thanks to the escalating volatility in the global oil market in the eight months to date.
Around the world, the Corona Virus is still raging at a pace that could not be tempered. China, which imports an incredible 25% (one-fourth) of the global oil production, is playing host to the plague, a puzzling epidemic that has resisted nearly every effort to tame it.
The plague is having its moment in the Chinese economy just as it is in the global oil markets, where the Brent (the international benchmark for Nigeria’s Bonny Light) has plummeted from $70.74 per barrel barely seven weeks ago to $56.53 as of 07.48 West African Time (WAT) today.
It is worthy of note that Nigeria’s 2020 budget is benchmarked at an oil price of $57 per barrel.
If Nigeria sustains the current pace of depletion to its external reserves, it will have nothing to fall back on in the next four years.
Data gleaned from the Central Bank of Nigeria suggest that the reserves have been on a plunging course for six months now, dating from 8th July 2019 and 20th February 2020, shrinking by 18.7% in between the points.
It stands to reason therefore that a swift policy intervention and immediate monetary buffers are needed for the nation’s foreign exchange reserves to find rescue.
The CBN states that the reserves tumbled from $45.14 billion at 8th July 2019 to $36.70 billion at 20th February 2019, shedding 18.7% or $8.44 billion in the process.
It is safe to say that if the nation sustains this momentum of loss, the balance in Nigeria’s external reserves will be zero by early 2025, when they will be fully depleted.
The signals are everywhere, making one wonders why no feasible reforms have been deployed to offset this external vulnerabilities.
At the moment, more than 60 per cent of Nigeria’s revenue derives from crude oil earnings and even the receipts are shedding weight astronomically.
An obviously greater danger lies in the fact that 90 per cent of the forex inflows into the economy comes from the oil trade.
Not long ago, Godwin Emefiele, the CBN chief, had alerted the nation to the risks embedded in the economy’s overreliance on crude export for survival.
Mr Emefiele went further to disclose that this background meant that shocks and negative developments in the oil market would find their way naturally into the economy.
It will take sweeping masterstroke policies on the part of monetary authorities to midwife a viable paradigm shift that will not only curb a crisis this large but also catapult the economy to stability.
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