LAGOS: Nigeria's foreign exchange reserves rose 7 percent to $37.534 billion in the three days to March 22, data on the central bank's website showed on Monday, a key aim of the bank which wants to shore up reserves to protect against shocks.
The recent signing of onshore oil production license renewal betweenNigeriaand US energy major Exxon is likely to have contributed to the forex boost. The 20-year extension is worth billions of dollars and would have included a sizeable, undisclosed signature bonus.
The figure was up from $34.957 billion on March 19 and from $34.827 a year earlier, the data showed.
Despite record high oil pricesAfrica's largest crude exporter has failed to build up foreign exchange reserves in recent years as government spending has been high.
Nigeriarelies on crude exports for more than 95 percent of its foreign exchange earnings and investors watch reserve data closely to gauge the defencesAfrica's second largest economy has against a potential dip in oil prices.
Central Bank governor Lamido Sanusi said during a rate decision last week thatNigerianeeded to build up foreign exchange reserves to cope better with external shocks.
Africa's most populous country removed subsidies on gasoline in Jan. 1 but was forced to partially reinstate them after more than a week of public protests over the increase in fuel costs.
Still the financial burden on government from the subsidies was reduced and this, along with the high price of oil, has helped forex reserves to increase.
"The news is encouraging, confirming our belief that since reforms allowing for the partial lifting of the fuel price subsidy, we have seen a more rapid pace of accumulation of forex reserves," said Razia Khan, Head of Africa Research at Standard Chartered.
"Investors will inevitably wonder what the implications are for the forex rate.
Given that the central bank wants to see a faster pace reserves accumulation, we doubt that there will be any immediate move to change the forex band," Khan added.
Nigeria's central bank tries to keep the naira in a 155/160 naira/$ band by controlling dollar supply in bi-weekly auctions.