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•Says economy weighed down by high import bills
By Chinwendu Obienyi
The Central Bank of Nigeria (CBN) has revealed that the nation’s gross external reserves fell by $1.5 billion in the first four months of 2023.
Latest figures on movement of the external reserves by the CBN tracked by Daily Sun revealed that the figure, which stood at $36.73 billion as of February 20 fell to $36.68 billion as of the end of February 27, 2023.
Furthermore, it fell from $35.14 billion to $34.91 as of the end of March and April 2023 respectively. This represents about $1.5 billion lost in the first four months of 2023.
This was even as the apex bank stated that the economy continues to be weighed down by high import bills, leading to pressure on foreign exchange (FX) and resultant increase in the general price level.
Governor Godwin Emefiele, who stated this during the Monetary Policy Committee (MPC) meeting in Abuja wednesday, said that the MPC noted the moderate decline in the level of gross external reserves to $34.91 billion in April 2023, from $35.14 billion by end-of March 2023.
According to him, the decline was attributable to transactions in the foreign exchange market and largely to miniscule accretion to reserves from crude oil exports.
He said, “The MPC observed that the economy continued to be weighed down by high import bills, leading to pressure on foreign exchange and resultant increase in the general price level.
The Committee noted that the economy needs to build up the stock of foreign reserves to act as buffers against shocks. In addition, the current trend in price development would continue to be monitored by the bank with greater collaboration with the fiscal authority, to address the drivers of inflation”.
Speaking more on inflation, Emefiele noted that despite the tight monetary policy stance adopted since its May 2022 meeting, inflation had not decelerated towards the CBN’s long run objective.
While stating that the situation remained the biggest challenge confronting macroeconomic stability in Nigeria, he said that headline inflation remained high due largely to a host of non-monetary issues outside the reach of the central bank such as the perennial scarcity of Premium Motor Spirit (PMS) and expectations of short-term hikes in the pump price of PMS; high and rising price of various energy sources; and a host of headwinds confronting the food supply chain.
“In this circumstance, the Committee enjoined the fiscal authority to explore other avenues to expand the fiscal safety net in an urgent bid to improve its ability to respond to legacy and
emerging shocks. Non-oil revenue sources, such as the expansion of the tax bracket, will enable the reduction of fiscal deficit and public debt to improve fiscal space.
Confronted by these challenges, the Committee tasked the Bank’s Research and Monetary Policy Departments to evaluate the counterfactual evidence from available data, using empirical
analysis. The results revealed that following each monetary policy rate hike, the rise in inflation moderated relative to what it could have been, if the MPC had not aggressively raised rates at all”, the CBN Governor said.
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