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Nigeria’s ‘rented foreign reserves’ increase risk perception

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ABUJA – The continued reduction in the accretion to Nigeria’s foreign reserves, currently at $41.5 billion, and foreign portfolio investments (FPI) accounting for about $20 billion of this amount raises the risk perception about Nigeria’s economy, BusinessDay interaction with economy watchers has revealed.

“The over $20.0 billion of the total foreign reserves being inflow from FPIs calls for concern, in view of the gradual phase-out of the US Fed stimulus programme in 2014,” say Afrinvest analysts. “Based on this development, it becomes imminent that the ‘rented reserves’ may depart the country sooner than we anticipate.”

Consequently, any portfolio reversal as a result of the United States quantitative easing will leave the country with no option than to borrow, with the resultant effect of higher yields on the Federal Government bonds and, consequently, increase in the level of recurrent expenditure.

For instance, government interest on domestic debt has been on the increase, from N495.1 billion in 2011 to N559.5 billion in 2012, to N591.8 billion in 2013 with N712 billion projected for 2014, in addition to the N300 billion CBN interest on T-Bills and Open Market Operations (OMO).

Some other analysts argue that the sustenance of foreign reserves on portfolio investments or ‘hot money’ portends more vulnerability of the economy to the whims and caprices of investors who may take advantage of the opportunities provided by the easing in the US market to embark on reversals.

Doyin Salami, a member of the Monetary Policy Committee (MPC) of the CBN, said at a recent meeting of the committee that he sees the deterioration in foreign reserve position as a reflection of a slowdown in inflows from foreign portfolio investors (FPI), adding that “FPI inflows, at $19.182 billion in 2013, accounted for approximately 82 percent of capital importation in 2013”.

Afrinvest analysts further say that if this happens, and coupled with the reduction in the accretion of the foreign reserves, then the risk perception about Nigeria would rise drastically.

“In addition, the reserves ($21.5 billion, assuming it remains at present level) may cover below three months of imports (below global requirement). This would also increase the country risk premium placed on Nigeria, hence an increase in the yields on FGN bonds,” say Afrinvest analysts.

“This increase will raise the cost of borrowing to the government, further snowballing its re-current expenditure (over 65.0 percent in 2014). The country may also find it challenging to raise additional funds through Eurobonds and may be lured to raise the coupon to what is commensurate with perceived risks,” they add.

Samir Gadio, emerging markets analyst at Standard Bank, London, observed that the accumulation of FX reserves in 2012 and early 2013 was a function of increased portfolio inflows which subsequently dried up and even turned negative recently.

Gadio wondered why Nigeria has been unable to rebuild its fiscal buffers despite the robust oil price over the past few years, which appears to reflect a moderate drop in oil output, stressing that possible revenue leakages and prior to this, the fuel subsidy scam, could be responsible.

“On top of the regular budget augmentation disbursements, the ECA funds have also been shared among the three tiers of government to fund ‘people-oriented projects’, but there is little tangible investment to account for,” said Gadio.

Gadio sees this as a serious problem as, according to him, the balance of the ECA declined to a low of USD2.5 billion in January, which is less than 1 percent of GDP (vs a median of 65 percent of GDP among major oil producing countries).

“Should this trend persist,” he added, “Nigeria will remain vulnerable to long-run oil boom and bust cycles, and a potential prolonged decline in the oil price below the USD100 pbl level at some stage in the future would seriously threaten the country’s macroeconomic position.”

Uche Chibuike, a member of the MPC, at the recent committee meeting, observed that recent international developments had already ensured a slowdown in the inflow of such speculative capital.

“Despite this, I find it prudent to continue to express my concern about speculative capital. This is because the vulnerability of the value of our currency in recent times has at least in part been as a consequence of the unstable nature of such speculative FDI. The earlier we begin to discourage such capital flows, the better. While FDI is desirable, it only makes sense when it is invested in the real sectors of our economy,” he said.

Ganiu Garba, also a member of the MPC, at the recent meeting attributed the problem to a non-forward-looking and non-strategic management of oil and gas resources with the consequent inability to sustain inflows of forex revenue to support and sustain some of the economic buffers.

“A strategic and forward-looking management of oil and gas resources is critical to building the forex reserves required to support a stable currency,” Garba said.

– BUSINESS DAY

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Sahara Champions Global Shipping Collaboration for $20m Mercy Ships Healthcare Impact

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AOW 2021: Sahara Group advocates measured transition in Africa’s upstream sector

Sahara Energy Geneva has highlighted the power of business collaboration to deliver lasting impact, with Mercy Ships Cargo Day celebrating more than $20 million raised over the past decade to support healthcare interventions in Africa.

More than 500 guests from over 150 shipping and trading companies gathered in Geneva recently for the 10th anniversary Gala of Mercy Ships Cargo Day, celebrating a decade of industry support for the international charity.

David Walker, Head of Chartering at Sahara Energy Geneva and Chairman of the Cargo Day Geneva Committee, joined industry leaders at the event, where he thanked the global shipping community, sponsors, media partners and Cargo Day committees in Geneva, London, Houston, Dubai and Singapore for supporting the initiative.

Cargo Day brings together charterers, shipowners, shipbrokers, and other shipping professionals who contribute through pledges, cargo commissions, and address commissions to support the work of Mercy Ships.

READ ALSO: 30 Nigerians Bag Postgraduate Scholarship from NNPC Ltd, Eni

Kola Motajo, Director, Sahara Geneva said Sahara’s involvement reflects the company’s belief in the ability of enterprise and partnerships to deliver impact beyond business.

“At Sahara, our focus is always on impact and lives transformed. Cargo Day demonstrates what is possible when businesses and individuals unite around a shared purpose. The $20 million milestone reflects the collective commitment of the global shipping community to improving healthcare in Africa. As Sahara looks Beyond XXX, we remain committed to building connections that create lasting value and possibilities for generations to come,” Motajo said.

Reflecting on Cargo Day’s growth, Walker said: “Ten years ago, we raised $300,000 and there were 70 people at the Gala. Today, we have more than 500 people coming from around the world to support such a great cause.”

Cargo Day 2025 raised more than $2.5 million, with 93 companies participating, including charterers, brokers, shipowners, and other partners.

Mercy Ships operates two hospital ships supporting patients in Africa with free life-changing surgeries, while also providing training and mentoring for local healthcare professionals. Cargo Day funding contributes to expenses associated with operating the hospital ships.

The 2026 Cargo Day campaign begins November 4 and will run through November and December, with companies participating through Mercy Cargoes, address commissions and pledges.

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30 Nigerians Bag Postgraduate Scholarship from NNPC Ltd, Eni

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Up to 30 Nigerian graduates have bagged postgraduate scholarships to pursue further studies both locally and in the Diaspora.

According to the Nigerian National Petroleum Company Limited (NNPC Ltd) and Italian energy company, Eni have awarded postgraduate scholarships

The beneficiaries emerged from more than 3,000 applicants following assessments of their academic records and performances in a recently conducted computer-based test (CBT).

The awards are under the 2026/2027 Postgraduate Scholarship Scheme of Nigerian Agip Exploration Limited (NAE), an Eni subsidiary, on behalf of the NNPC-NAE Production Sharing Contract (PSC) partners.

In a statement, NAE’s Vice Chairman and Managing Director, Maurizio Pinna, said the initiative was designed to develop local talent and equip young Nigerians with skills relevant to the oil and gas industry. Pinna congratulated the beneficiaries, noting that the scholarships would enable them to pursue their academic ambitions and achieve their career goals.

According to NAE, the programme reflects its commitment to education, innovation and capacity building in Nigeria.

The company urged the beneficiaries to make good use of the opportunity by acquiring valuable knowledge and skills that would contribute to national development, particularly in the energy sector.

Ten of the awardees will undertake postgraduate studies in universities abroad, including Imperial College London, Robert Gordon University in Aberdeen, Newcastle University, the University of Aberdeen and the University of Hull in the United Kingdom.

READ ALSO: Navy Recovers 98,000 Litres of Suspected Stolen Crude in Rivers

The remaining 20 beneficiaries will study at Nigerian universities in fields including engineering, geosciences, petroleum and environmental technology, energy economics, renewable energy and energy transition.

Established in 2007, the NNPC-NAE PSC postgraduate scholarship scheme is part of the partners’ human capital development programme aimed at promoting specialised knowledge and addressing skills shortages in Nigeria’s deep offshore oil and gas operations.

NAE said 380 Nigerian graduates had benefited from the scheme since its inception, gaining knowledge and skills required by the oil and gas industry.

Beyond education, Eni, through NAE, has implemented sustainability initiatives in Nigeria covering healthcare, access to water, infrastructure and community empowerment.

Eni has operated in Nigeria since 1962 and currently has an equity production of about 55,000 barrels of oil equivalent per day. The company also holds a 10.4 per cent stake in Nigeria LNG.

NAE was incorporated in 1996 to manage Eni’s deep offshore exploration and production assets. It became the first oil and gas company in Nigeria to produce oil from the country’s deep offshore when its Abo floating production, storage and offloading (FPSO) vessel began operations in 2003.

The company has interests in nine offshore blocks in Nigeria, either as operator or co-venturer, including PML 102 and PML 103, where the Zabazaba-Etan fields are being developed.

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DPRP’s Appeal Against Fuel Import Licence Ruling Earns Stakeholder Backing

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The Dangote Petroleum Refinery and Petrochemicals’ (DPRP) decision to seek leave to appeal a Federal High Court (FHC) judgment directing the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) to continue issuing petroleum product import licences to three major oil marketers is being backed by the Energy Watchdog.

This was detailed in a statement by Martins Tayo, which considers the move as necessary to protect Nigeria’s domestic refining industry and reduce dependence on imported petroleum products.

The judgment, delivered on September 28, 2026, by Justice Inyang E. Ekwo in Suit No. FHC/ABJ/CS/1363/2026, ordered the NMDPRA to continue issuing import licences to Matrix Energy, AA Rano and AYM Shafa.

The Energy Watchdog argued that the ruling undermined the objectives of the Petroleum Industry Act (PIA) and threatened investments in domestic refining capacity.

“We completely reject and condemn in totality the judgment of the lower court. It is a deeply flawed decision that disregards the clear intent of the Petroleum Industry Act and the national interest in building a robust domestic refining industry,” the statement said.

READ ALSO: NNPC Petrol Discount: Oyedele Explains How Lower Margins Could Boost Profits

The group further cited a reported decline in petrol imports in the first quarter of 2026, alongside increased supplies from local refineries, particularly the Dangote facility, as evidence of the country’s growing domestic refining capacity.

It argued that sustaining import licences despite rising local production could undermine efforts to achieve self-sufficiency in refined petroleum products and weaken investor confidence in the sector.

According to the organisation, Dangote Refinery’s decision to seek leave to appeal as an interested party was timely, given the potential implications of the judgment for the future of Nigeria’s downstream petroleum industry.

“The lower court’s decision amounts to a judicial endorsement of continued importation irrespective of local capacity.

“We condemn it without reservation because it threatens to reverse the hard-won gains of the last few years,” Tayo stated

The Energy Watchdog maintained that the Petroleum Industry Act was designed to encourage investment in midstream and downstream infrastructure, warning that allowing the ruling to stand could send a negative signal to investors who have committed substantial resources to domestic refining projects.

The group urged the Court of Appeal to grant the DPRP leave to appeal and ultimately set aside the FHC’s order, describing the case as significant to Nigeria’s energy security and the development of its refining industry.

“Any judgment that forces the continued importation of fuel products when local refineries can supply the market is a setback for Nigeria.

“We condemn the lower court ruling in the strongest terms and fully support the appeal filed by Dangote Refinery,” the statement concluded, “The Court of Appeal must correct this error and reaffirm that the era of automatic import licences is over.”

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