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Nigeria’s foreign reserves to hit $73.2bn

Nigeria’s foreign reserves will hit $73.2bn in 2008; estimates from the International Monetary Fund and government officials have shown.

This comes just as the Federal Government said it was not contemplating the option of exiting its reserves from the United States dollar despite the weakening of the currency in recent times.

According to the estimates, which were jointly prepared by government officials and the IMF, crude oil production—the main source of Nigeria’s earnings – will rise marginally to 2.3 million barrels per day.

Attacks on oil installations have stagnated crude production in Nigeria as the Movement for the Emancipation of Niger Delta stepped up its campaign of sabotage, but soaring crude prices have compensated for the losses.

On Sunday, the Central Bank of Nigeria said foreign reserves crossed the $60bn mark for the first time. The reserves are now $62bn, the CBN said on its website.

High oil prices that are trading above $130 per barrel have boosted Nigeria’s reserves just as the United States dollar continued to weaken.

“The value of the reserves has dropped by 40 per cent,” the Chief Economic Adviser to the President, Dr. Tanimu Yakubu, said on February 20.

“As you know, Nigeria accumulates her foreign reserves in dollars; therefore as the dollar depreciates, the purchasing power of Nigeria’s foreign reserves also depreciates,” he said.

The Minister of Finance, Dr. Shamsuddeen Usman, however, said the government had no plans to exit the dollar.

“There is no urgency to move out of the dollar,” Usman said in Maputo, Mozambique on May 15.

He said that there were several reasons why Nigeria would not contemplate such a move.

He explained that the law guiding the management of Nigeria’s foreign reserves was “restrictive.”

“The CBN is required to keep this money in very liquid assets. To take some of this money and put in some of the sophisticated instruments will not be allowed as this does not exist in the law,” he said.

According to him, countries with huge reserves including China, whose reserves are also in dollar, have looked at the issue with the conclusion that exiting the dollar might escalate more global crises instead of proffering solutions.

“The market is big but is also small,” he said.

He, however, said that the government was watching the trend so that it would not affect the domestic economy.