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External Reserves Hit $54.8bn

This Day
Deji Elumoye
28 January 2008

Nigeria's external reserves increased from US$51.33 billion during the week ended January 4 to US$54.79 billion by January 18, the Central Bank of Nigeria (CBN) has said. This represents a 6.74 percent or $3.46 billion increase, following the rise in crude oil production and the high oil prices in the international market.

But Mr. Babatunde Fashola (SAN), the Governor of Lagos State, has expressed reservation at the non-utilisation of the nation's huge foreign reserves. The banking watchdog, which made the latest figures known in the latest edition of its Economic Indicators Report, explained that the current level of reserves could support 23 months of foreign exchange disbursements.

The CBN noted that the average volume of output of crude oil rose from 2.17 million barrels per day to 2.21 million barrels per day during the week under review, while the crude price stood at US$92.77 per barrels as at January 18. It also observed that currency in circulation in the country dropped by 5.63 percent or N53.6 billion to N897.7 billion by January 18, 2008.

Nigeria's currency in circulation had reached its peak level of N951.3 billion during the week-ended January 4, and slightly declined to N933.6 billion by January 11. The CBN attributed the decline to the decrease observed in currency outside the banking system during the period.

It was, however, a mixed development in banks' savings and lending rates during the week-ended January 18. "The average interest rate on savings account was 3.43 percent as at January 18, 2008 from 3.32 percent on January 11. The average prime lending rate of banks was 16.66 percent during the period under review, compared with 17.47 percent on January 11.

"The average maximum lending rate of banks stood at 18.67 percent by January 18, as against 17.52 percent in the preceding week," the CBN explained. It noted that the naira maintained its exchange rate to the dollar in the last three weeks, trading at N116.31 to the dollar at the Wholesale Dutch Auction System (WDAS).

But speaking at the weekend in Lagos while addressing members of the Lagos Country Club at its New Year party, Fashola cautioned the federal government against maintaining external reserves when there are no functional hospitals, good roads and universities in the country.

He opined that the reserves could be spent in hiring expatriate knowledge if the nation fails to plough it back in its educational system. He noted that at a time when the American dollar is losing value and many economies are thinking of ways to diversify the base of their economies, the value of the $51 billion may be gone if Nigeria's economic advisers do not become proactive with the savings.

Fashola explained that Lagos is moving rapidly towards fiscal and financial independence as shown by the performance of the 2007 budget as well as the Internally Generated Revenue profile of the state which stood at over 75 percent. He added that the significance of the good performance of the budget and the revenue profile of the state is that the government can perform better if it had more money to work with.

Fashola recalled that when his predecessor in office, Asiwaju Bola Tinubu laid the foundation for fiscal and financial independence of the state, no one expected that some months later, the funds of the local councils would be withheld illegally for 18 months. He added that with financial re-engineering, the government then succeeded in running the councils successfully for 18 months with funds generated internally, culminating in the state now generating between eight and nine billion naira monthly.

Copyright © 2008 This Day

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