In a bid to save the naira from continuous decline, the Central Bank of Nigeria sold a total of $2.75bn at the Wholesale Dutch Auction System in the month of June.

Information gathered by our correspondent on the CBN website showed that the external reserves dropped marginally to $36.6bn in the same month under review.

It was also gathered from a report by the Financial Derivatives Company Limited that the forex revenue decline was partially offset by the United States dollar appreciation.

Analysts at FDC said the naira had been on speculative attack.

The report said, “Oil price decline continues to dip by five per cent in June. Year to date Bonny Light has shed 29 per cent or $35 from its peak of $130per barrel. The impact on revenue for Nigeria is magnified. In April oil revenue declined by 7.1 per cent to $4.72bn, while net inflow of forex also dropped sharply to $1.49bn.

“Marginal increase in money supply growth of 2.24 per cent month-on-month, when annualised, there has been a decline in money supply growth of 0.74 per cent. CBN is mopping up and forex sales are keeping a lid on M2.”

On the cash-less policy, the report said it had mild impact on consumption patterns and behaviour.

It added, “Sharp fall in oil price is having a magnified impact on fiscal revenues and widening the deficit to above three per cent of GDP.

The appreciation of the US dollar is forcing a gradual slide in Nigeria’s terms of trade from 113.6 to 105 in 2012.

“The oil price decline and the currency impact have reduced Nigeria’s share of world exports from 0.63 per cent to 0.58 per cent. China now controls 17.5 per cent of Nigeria imports, US 9.1 per cent and India 4.7 per cent.”

The analysts noted that the correlation between oil price and forex revenue remained positive, thereby holding production constant.

“The economy is highly vulnerable to oil price shocks. A one dollar decline in oil price has 0.8 per cent impact on revenue,” the report added.

The report said the new import levy on wheat and rice would add to the price pressure.

“Nigeria imported an estimate of 3.5 million tonnes of wheat as of May 2012. Flour millers are likely to transfer burden of higher costs to consumers. We forecast inflation rate is likely to increase at 12.52 per cent in June by a maximum of 0.6 per cent,” it said.

Source: Punch/Ademola Alawiye