Petroleum products imports deplete foreign reserves to $38.75b
By Jeph Ajobaju, Chief Copy Editor
Importation of refined petroleum products is draining foreign reserves which currently stand at $38.75 billion and hardly enough to sustain dollar payments for goods and service acquired from overseas.
The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) gave the figure in a communique it posted on the CBN website after its latest meeting.
The MPC unanimously voted to raise benchmark interest rate to 13 per cent to contain inflation and strengthen the naira.
“Gross external reserves declined moderately to US$38.36 billion as of May 19th, 2022 from US$39.28 billion at end-March 2022. This was attributed to the weak accretion to the reserves from exports and the high cost of importation of refined petroleum products,” the CBN disclosed.
It said the financial system is stable but still has to be brought down to the prudential level.
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Major metrics adequate
“The Capital Adequacy Ratio (CAR) and the Liquidity Ratio (LR) remained above their prudential limits at 14.6 and 43.7 per cent, respectively.
“The Non-Performing Loan (NPL) ratio stood at 5.3 per cent in April 2022, compared with its prudential limit of 5.0 per cent, reflecting sustained stability in the banking system, though there remains a need to bring this down to the prudential limit,” the CBN added, per reporting by Nairametrics.
Key points
- External reserves depreciated further by 0.11% on May 20 to stand at $38.75 billion from $38.79 billion the previous day.
- The dip can be linked to the involvement of the CBN in the foreign exchange (FX) market to preserve the stability of the naira.
- The IEFX windows of the CBN also offer high-interest rates to foreign portfolio investment (FPI) to attract dollar inflows. The CBN spent trillions of naira to pay interest on questionable OMO bills that totalled $13.4 billion in FPI in 2019.
- External reserves received a $5.15 billion boost in 2021, riding on $4 billion Eurobond secured in September 2021 and $3.35 billion IMF facility under the Special Drawing Rights.
- Foreign reserves rose by $5.99 billion in October 2021 but have been declining since November, failing to reach the $40 billion mark.Bottom of Form