External Reserves Gain $3.98bn In 3 Weeks

External Reserves Gain $3.98bn In 3 Weeks

On October 20, the reserves increased to $40.76 billion, up from $36.78 billion at the end of September.

The reserves increased by $2.76 billion in September from $34.02 billion at the end of August, continuing their upward trend.

According to Mike Obadan, a professor of economics and Chairman of Goldmark Education Academy in Benin City, Nigeria’s currency is decided by the economy’s strength in terms of production capacity and productivity, structure, and diversification of the export production base.

Obadan, who is a former director-general, National Centre for Economic Management and Administration, Ibadan, Nigeria, said: “A vibrant and diversified productive real sector of the economy saves a nation the disbursement of scarce foreign exchange for the import of finished goods and production inputs, especially where these could be produced locally, and reduces pressure on foreign exchange demand.

“In the same way, an export-oriented production base contributes substantially to foreign exchange supply which in turn strengthens the local currency.

“But in Nigeria, these desired attributes have not been achieved. Hence, the heavy dependence of the country on the oil sector for foreign exchange and government revenue creates instability in the naira exchange rate.”

She stated that there is a direct correlation between the oil market and the naira exchange rate.

“When the oil market is enjoying a boom, other things being equal, the naira exchange rate strengthens/appreciates. But when there is a slump in the market, characterised by low prices, accretion to external reserves drops and the naira exchange rate depreciate,” he said.

Obadan said the industrial and agricultural sectors had also not been helpful in stabilising the exchange rate.

According to him, the manufacturing sector imports most of its raw materials and equipment but ends up with little value addition to Gross Domestic Product and insignificant export earnings.

“Although the agricultural sector contributes over 24 per cent to the GDP, its contribution to foreign exchange earnings is also very low,” he added.

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