At 5.45 Months Import Cover, Nigeria’s FX Reserves Now At Disturbing Levels- Expert

An expert in banking, finance the economy, Dr. ‘Biodun Adedipe, founder and Chief Consultant of B. Adedipe Associates Limited (BAAConsult), at the weekend in Lagos, expressed concern over Nigeria’s dwindling foreign reserves level.

Addressing members of the Finance Correspondents Association of Nigeria (FICAN) at the Half-Year Economic Review and outlook for the banking sector, Adedipe warned that at 5.45 months of import cover, the reserves is way below the 11 months required for an economy in crisis.

Giving a breakdown, he said a monthly import bill of N2.283tr or $6.025bn in the first quarter (Q1) 2021, Nigeria’s liquid external reserves of $32.85bn as of July 9, 2021, means that Nigeria is below the minimum threshold of 6 months of imports for stability and twice below 11 months required for an economy in Crisis.

Nonetheless, he observed improvements in some economic indices, just as he acknowledged the resilience of the banking industry over the last five years, even as he agreed that the sector has demonstrated effective marketing

However, at an average of 70.4%, he said the industry’s loan-to-deposit ratio is below the prescribed maximum, which is a sign that there is room to expand lending, while noting the challenging lending environment in need of de-risking, especially lending to Medium, Small and Medium-scale Enterprises (MSMEs).

He assured that Nigerian banks are almost as sophisticated as those anywhere else in the world, with a proven track record of being at the forefront of technology leverage, following which they continue to do well in the digital space supported by deepening internet penetration.

Other factors working for the good of the country’s banks, he added, are the large youthful and rapidly growing population, rapid urbanization, strengthening innovation culture driven by survival instinct, and increasing attention to competitive strategy

Adedipe noted that forward-thinking is today the order of the day and that banks are already competing against large powerful shadow banking systems, urging them to do more in view of the stiffening competition from Silicon Valley both in the form of Financial Technology (FinTech) companies and big tech companies like Amazon, Apple, Facebook, Google and now Walmart that is here to stay.

According to Adedipe, “there is no sector you operate in, in the Nigerian economy that there is no space for you to thrive, if you do the right things, at the right places, and right time, for the right person and with most things now digital.”

The downward trend in all indices: price, production, and export, he added, is a warning sign for Nigeria, and a pointer to the urgency of diversifying its foreign earnings by taking pragmatic steps to save the economy, already in crisis.

Analysts insist that with the economic recovery still fragile, the country’s business cycle going forward will remain anchored on the restoration of peace in troubled regions especially, confidence in the mind of farmers who are needed to return to their farms without fear of being attacked by herdsmen or bandits,  developments in the oil market and domestic foreign exchange policies.