The Central Bank of Nigeria has given reasons why the nation’s external reserves, which currently stand at $44bn, have been on a downward trend lately.
Speaking during the CBN Day at the ongoing Abuja International Trade Fair in Abuja on Wednesday, the Director, Corporate Communications at the apex bank, Mr Isaac Okorafor, explained that the external reserves had been going down recently because of higher yields in the United States.
Okorafor, however, gave an assurance that at the current level, the external reserves were sufficient to take care of the nation’s import bill for 17 to 20 months, much more than the three-month standard recommendation.
According to him, some foreign investors who had gone to emerging markets to take advantage of the high yields, have had to go back to the United States because of better opportunities there at the moment, adding that Nigeria’s situation was not peculiar.
Okorafor said, “The drop in our forex reserves is basically as a result of the capital flow reversals arising from rising interest rates in the United States. You will recall that the Federal Reserve has been raising rates and has even given guidance that this would continue in the near term.
“As a result of this, investments in the emerging and some frontier markets are gravitating towards the US market to reap higher returns. There is also the factor of election cycle. In Nigeria, however, we have done much better than most emerging and frontier economies.”
He added, “Some of these countries have suffered substantial depreciation in their currencies as a result of these flow reversals. For instance, since this year, Argentina has lost 134 per cent of its currency to depreciation largely occasioned by these reversals; Brazil lost 34 per cent; Turkey, 78 per cent; Iran, 25 per cent; South Africa, 19 per cent; Russia, 18 per cent; Pakistan, 17 per cent; United Kingdom, 3.7 per cent; Japan, 1.3 per cent; whereas Nigeria has gained six per cent by way of appreciation.
“The key reason is because the CBN adopted a forex management strategy that has worked successfully, achieving a comfortable stability in the exchange rates and still maintaining an equally comfortable reserves level.”
The CBN spokesperson also listed some intervention programmes, which the apex bank had undertaken in order to propel the growth of Small and Medium Enterprises in the country.
Some of the interventions include the Agricultural Credit Guarantee Scheme Fund; N200bn Commercial Agricultural Credit Scheme; N200bn SME Restructuring and Refinancing Facility; SMEs Credit Guarantee Scheme; N300bn Power and Airline Intervention Fund; and N220bn Micro, Small and Medium Enterprise Development Fund.
“It is pertinent to mention here that so far, the overall impact of these interventions is the enhanced operational capacity of the SMEs that has translated into a reflation of our economy with the attendant growth and development,” Okorafor added.
Responding, the Vice-President, ICT, Abuja Chamber of Commerce and Industry, Prof Adesoji Adesugba, expressed appreciation to the apex bank for its efforts to lift the nation’s economy, especially through SME intervention programmes.
He, however, pleaded with the bank to make such interventions through channels such as chambers of commerce instead of the traditional banking channels.