Nigeria’s external reserves, which have risen steadily since the last quarter due to reasonably high oil prices and stability in the foreign exchange market, climbed higher to close at $45.68 billion on Friday.
Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, revealed this while delivering a keynote address at the 46th Annual Bankers’ Dinner held in Lagos at the weekend.
Current foreign exchange reserves, derived mainly from the proceeds of crude oil sales, represented a year-to-date appreciation of $12.7 billion or 35.08 per cent, compared to $32.98 billion at the beginning of the year.
Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, had said the Federal Government planned to grow reserves to $50 billion by the end of the year, but will still be short of $62 billion at which the country’s reserves peaked in 2008 before the global financial meltdown.
Continuing, Sanusi said: “It is important not to be complacent and it is important to recognise that there are dark clouds in the horizon and it is extremely important to start building and continue building the fiscal buffers.
“We need to go into a period of strong and serious fiscal restraints and consolidation. We must continue to build up external reserves and protect the economy from external shocks and focus on the strength and resilience of the banking system.
“As at close of business today (Friday), our foreign reserves stand at $45.68 billion. We have kept the exchange rate stable within our announced band of N155; plus or minus three per cent.
“In a year when we removed 50 per cent of fuel subsidies, where you have a very high increase in international food prices and energy prices, where you have general instability and where we had forecast that inflation might reach 14.5 per cent in August, inflation is still under 12 per cent.
“As at September, inflation was 11.3 per cent, but we expect that there might be some inching up in food inflation figures expected to come out on Monday (today).
“But because of the tight monetary conditions we have kept, we now have a moderation in core inflation. High reserves of more than a two-year high, stable exchange rate, relatively benign inflation, but obviously, very high interest rates and lending rates in the money market, and that is the price we have to pay for the kind of stability that we have.
“But we are building buffers for the economy in the event of an external shock.”
According to the CBN boss, save for role played by the Asset Management Corporation of Nigeria (AMCON) in the resolution of the banking crisis, depositors’ funds and interbank placement worth N30 trillion would have been lost.
He expressed satisfaction over the role played by AMCON in the purchase of banks’ non-performing loans (NPLs) as well as the recapitalisation of troubled banks, saying: “We are happy to say that a few months ago, Spain copied the AMCON model.”
“AMCON had to put in nothing less than N2.3 trillion just to fill the holes left by the management of those banks, and when I talk about holes, I am talking about negative capital and depositors’ funds that would had gone down.
“If that N2.3 trillion had not been put in, what would have been lost was N30 trillion in deposits and interbank placements.
“Many of the banks that were safe and healthy would have been brought down by the banks that had taken money from them. And many people don’t realise the implications of that.
In addition, while the costs are there, the actual cost to the federal treasury that would have come under the central bank’s balance sheet is N500 billion over 10 years, with a present value of N300 million,” Sanusi explained.
He warned that banks were not set up to invest in government bills alone, nor to use depositors’ funds to bet on the capital and real estate markets, stressing that the primarily role of commercial banks was to mobilise savings and move such savings into the real economy where real production, real jobs and real income is created.