THE nation’s foreign exchange reserves rose around three per cent to $38.2 billion by mid-August from $37.1 billion at the end of last month, the Central Bank of Nigeria (CBN) said on Wednesday.

Forex reserves stood at $43.3 billion a year earlier, but have fallen sharply since then due to demand pressure from importers and a reduction in accruals from oil export revenues.

The CBN has maintained that the present level could finance more than 17 months of import.

Only last week, the Federal Government distributed $4.7 billion in revenues and windfall oil savings to state and local governments for July, a massive disbursal which is likely to trigger a drop in bond yields and interbank rates next week.

The government shares its revenues among three tiers of government each month - federal, state and local - and tops the disbursal up with a withdrawal from its windfall oil savings if there is a shortfall.

Accountant-General, Ibrahim Dankwambo, said Nigeria had distributed N404.27 billion ($2.7 billion) in revenues and $2 billion from its crude oil savings for last month, making up one of the largest monthly disbursals ever.

Around 80 per cent of the liquidity in the country comes from public cash flows and the monthly allocations can trigger significant shifts in bond yields and interbank rates.

Among the major recipients of the monthly revenue distributions are the country’s 36 states.

Dankwambo said a further $1 billion had been withdrawn from the excess crude account, a pillar of IMF-backed reforms into which Nigeria saves oil revenues above the benchmark price, to be set aside for the creation of a sovereign wealth fund.

The withdrawal leaves just $460 million in the excess crude account, compared to around $20 billion in early 2007, the start of the current presidential term.

Finance Minister, Mr Olusegun Aganga, a former Goldman Sachs executive appointed in March, had said that he wanted a sovereign wealth fund to replace the excess crude account, which has no clear constitutional basis.

But the fund has not yet been created and it was unclear where the $1 billion would be held in the interim.

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