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Author Topic: Crisis In The Niger Delta Hits Nigeria's External Reserves  (Read 1881 times)

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Crisis In The Niger Delta Hits Nigeria's External Reserves
« on: August 04, 2009, 08:50:54 AM »
From Weneso Orogun and Onwuka Nzeshi in Abuja

Finally, the chicken is coming home to roost. The Niger Delta crisis – which has dealt a heavy blow to Nigeria’s oil income and crude production – is finally threatening to consume the country’s foreign reserves which had been the saving grace in the current global financial meltdown.
With Nigeria now losing an average of $1 billion in oil revenue every month as a result of production shut-ins rather than a fall in crude oil prices, the Central Bank of Nigeria (CBN) may no longer be able to defend the current value of the naira, it has emerged.
The reserves, which peaked at about $62 billion in 2008, could fall to below $40 billion soon if the CBN continues to draw from it to protect the naira by meeting foreign exchange demand at its weekly auctions.
The reserves dipped to $50.11 billion in January 2009 and now stand at $43.46 billion with bleak prospects for recovery as the nation grapples with falling production as a result of militant activities.
Nigeria is unable to benefit from the slight recovery in crude prices, which appear to be stabilising at $60 per barrel – $15 above Nigeria’s budget benchmark.
CBN has virtually become the only supplier of forex to the economy since the onset of the financial crisis, as other sources have dried up, thereby putting pressure on the apex bank to withdraw from the reserves to defend national currency.
The apex bank manages the naira exchange rate by controlling the supply of dollars to banks at auctions held on Monday and Wednesday every week.
The impact of reduced supply is already being felt as the naira declined to its weakest level in 15 years last Friday following CBN’s decision to limit the supply of dollars at its weekly auction.
THISDAY reported last Saturday that the naira slipped to N156.85 to the dollar, as the CBN sold $183.7 million to commercial banks last Wednesday, as against the demand of $604.84 million.
The depreciation of the naira is a continuation of the trend since November 2008 when it exchanged for N119 to $1 and now trades for N156, representing almost a quarter of the value.
Although the depreciation has boosted government revenue a bit in naira terms, the sharp drop in oil production has had a more negative impact on the revenue profile.
Nigeria produced 184.66 million barrels of crude oil and condensate in the first quarter of 2009, representing average daily production of 2.05 million barrels per day.
This production performance represents 7.52 per cent decline relative to the 198.54 million barrels achieved in the last quarter of 2008.
The fourth quarter of 2008 performance represented average daily production of 2.16 million barrels per day and is 1.28 per cent higher than the third quarter 2008 performance of 196.03 million barrels.
But the country, which derives about 90 per cent of its revenues from crude oil exports, currently produces less than 1.3 million barrels per day compared to its 2.2mbpd projection for the year.
Meanwhile, the Niger Delta crisis does not look like abating as President Umaru Musa Yar’Adua's amnesty programme designed to disarm and rehabilitate militants in the Niger Delta region came under fresh threat yesterday.
Prince Joseph Etella Harry, a representative of some militant groups, including the Movement for the Emancipation of the Niger Delta (MEND), raised questions on the implementation process, insisting that government had jettisoned an earlier proposal to make available an initial sum of N3 billion in exchange for a total for 10,000 guns.
The militants, according to him, also demanded that each member of their organisation be built a posh three-bedroom apartment comparable to the standards enjoyed by employees of multinational oil firms operating in Nigeria.
They, however, said they would pay for the apartments under a10-year mortgage plan.
Harry, who is the chief mediator of the coalition of militant groups, briefed newsmen on the latest threat to the amnesty programme in Abuja yesterday,
He said he had earlier negotiated and pledged to return 10,000 AK 47 rifles and over 20,000 rounds of ammunition if only the government used a preferred channel to mop up the arms and return same to security agencies. 
Harry, who is also the Chairman, Rumuola Elders Patriotic Forum, Rivers State,    disclosed that whereas the militants were prepared to lay down their arms and embrace the peace overtures of the government, some persons in government have been frustrating the full implementation of the disarmament programme as conceived by the militant groups.
Harry told newsmen that the only way to achieve complete and sustainable peace in the region was to follow what he called the original amnesty plan contained in a proposal submitted to the Presidency and Office of the National Security Adviser before the Federal Government declared the amnesty programme.