NIGERIA’S foreign reserves recorded a shortfall of $482.18 million, following a sharp depletion of the reserves from $45.14 billion to $44.65 billion in July according to records obtained from the Central Bank of Nigeria, CBN.

In a report titled “Easy money: Time to create buffers’ by Nigerian based financial outfit, FSDH Merchant Bank, released in August, it blamed the falling reserves on low crude oil prices and low Foreign Portfolio Investments, FPI, inflows in the country.

FPI occurs when investors purchase non-controlling interests in foreign companies or government bonds to create economic inroads through capital inflows.

“The current level of the foreign reserve can still provide short-term support for the value of the Naira which is enough to cover over 13 months of imports,” the report revealed.

It also noted that the medium-term stability in the foreign exchange market will depend on the country’s ability to increase its foreign exchange receipts from both crude oil and non-oil products.

“The average benchmark price for Bonny Light in July 2019 stood at $66.24 per barrel when compared with the average price in June.

“However, in the last few days, the crude oil price has dropped below $60 per barrel as a result of trade tensions between the United States and China is likely to have impacts on the global economy. This may have negative impacts on revenue and other key prices in Nigeria,” it said.

The report forecasts a gloomy future for the Nigerian economy with regards to the daily crude oil production in Nigeria which decreased by 5.04 per cent from 1.83 million barrels per day in April to 1.73 million barrels per day in July.

“Though the 2019 budget benchmark is at 2.3 million barrels per day, the lower crude oil daily production compared with the budget benchmark may pose negative implications on Nigeria’s revenue receipts and fiscal buffers,” it said

CBN Governor, Godwin Emefiele, in a report stated that the recovery of the foreign reserves from its low point 3 years ago was a sign of growth.

“Our external reserves have risen from $23 billion in October 2016 to over $45 billion in June. The foreign reserve will be conserved and utilised strictly for diversification of the economy, and not for encouraging more dependence on foreign food import bills,” he said.

He affirmed the need for a different strategy to grow the economy apart from relying on revenue from exports.

“While the drop in our export earnings arising from our reliance on crude oil exposed the fragility of our domestic economy in 2016, it also reinforced the view within the CBN and the Bankers Committee on the need to revise our growth strategy as a nation,” he stated.

He said with crude oil as a major source of the country’s foreign exchange, the nation’s economy will always be vulnerable to fluctuations in the price of crude oil.