Posted by From Kunle Aderinokun in Abuja on
World Bank has commended Nigeria for accounting for $10 billion of the $19 billion increase in gross external reserves in sub-Saharan Africa, which accumulated to a total of about $60 billion in 2004.
World Bank has commended Nigeria for accounting for $10 billion of the $19 billion increase in gross external reserves in sub-Saharan Africa, which accumulated to a total of about $60 billion in 2004.
According to the Bretton Woods institutions in its Global Development Finance 2005 (GDF) 2005) launched yesterday at the bank's country office in Abuja, the $19 billion increase in foreign reserves was highly concentrated in Nigeria ($10 billion) and South Africa ($6 billion).
The bank added that when viewed globally, the reserves in Nigeria, which stood at $17 billion as at December 31, 2004, South Africa, $12 billion and Botswana, $5 billion accounted for 60 per cent of reserves held in the region.
Speaking at the launch, Lead Author of GDF 2005 report, Jeffrey Lewis, said developing countries including Nigeria have been accumulating reserves but are not investing it.
He, however, said there was nothing wrong with accumulating reserves, noting that for 90 per cent of the developing countries that accumulated reserves last year, it made sense to do that. He said in the case of Nigeria, the reserves accumulated is being used to cushion the effect of the volatility of oil prices as well as serve as an indicator of good macro-economic policy to investors and creditors.
According to him, "the implication is different for different economy. For 90 per cent of the developing countries that accumulated reserves last year, it makes sense too, there is nothing wrong with it. It is done to provide a kind of a cushion. It is something that the investors want to see, it's part of the commitment to sound macro-economic policy.
"For a country like Nigeria, we know that commodities prices in general and oil prices in particular tend to rise and tend to fall and the accumulation of a lot reserves over a long period have to be considered in the context that one could easily end with the other story. The era of high oil prices is here, IMF has predicted that it will stay high for much longer. For a country like Nigeria that got their reserves accumulated because of the incredible rise in oil prices, it's different. For a country like Nigeria, if your resource is sitting down there and it's being put into product uses elsewhere without getting rid of all of them, it makes sense."
World Bank also said Gross Domestic Product (GDP) in sub-Sahara Africa increased from 3.4 per cent in 2003 to 3.8 per cent in 2004, which is the highest growth rate since 1996 and the 11th consecutive year of positive growth. The bank attributed the strong performance partly to an impressive expansion in trade within the region and with other regions.