CBN predicts Nigeria to end 2020 with $34.3bn

The Central Bank of Nigeria (CBN) has predicted that the country’s external reserves were likely to be in the region of $34.3 billion by the end of the year.

In its 2020/2021 Monetary, Credit and Foreign Exchange Policy Guidelines issued at the weekend, the apex bank also said it would continue to deploy liquidity management measures to achieve stem the tide of rising inflation.

“Sequel to the COVID-19 pandemic, the viability of the external sector in 2020 is expected to deteriorate, given the present worsening current account balance and depletion of external reserves driven, largely, by decelerating export receipts, particularly oil.

“Specifically, the degree of external reserves accumulation is expected to decelerate, as outflows are expected to outweigh inflows.

“As a result, external reserves are expected to lie between US$29.9 billion and US$34.3 billion at end-December 2020 (predicated on current declining oil price between US$20 and US$40).

“This development, in addition to exchange market pressures, emanating from speculative activities in the BDC and I & E segments of the foreign exchange market is expected to exert pressure on the naira exchange rate.

In addition, increased risk aversion behaviour by investors may negatively impact on capital inflow, as they flee to safe-haven assets, the bank said.”

On inflation, the apex bank said the aim is to curtail the level of inflation to a level that is conducive for inclusive and sustainable growth.

“The Bank shall continue to be proactive in its oversight function of the banking system to continue to ensure financial system stability. Furthermore, it will maintain sound, stable and efficient payment systems to support the conduct of monetary policy.”

It will also continue to conduct monetary policy anchored on the Medium-Term Expenditure Framework (MTEF) of the Federal Government, with the objective of achieving price and financial stability.

“The rationale for the aforementioned is that monetary policy impacts its ultimate goal with a lag. In consonance with the MTEF, the CBN is able to anchor expectations, deliver time-consistent policies and react to temporary shocks including those associated with frequent changes in fiscal policy.”

“The monetary targeting framework remains the monetary policy strategy in 2020/2021 fiscal year with implicit inflation targeting.

“Consequently, the growth in broad money supply (M3) will be closely monitored in line with the projections for 2020 and 2021.”

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