Nigeria’s gross official reserves slipped below the $40 billion mark to $39.982 billion on February 3, the lowest in three months, according to data obtained from the Central Bank of Nigeria’s (CBN) website.

The reserves had also declined in the month of January 2022, falling by $481 million to $40.04 billion from $40.50 billion as of the end of December 2021.

The rally in oil prices is not translating to more dollars in Nigeria’s reserves for only the fifth time in at least two decades, as a growing petrol subsidy bill and low oil production shut Africa’s largest oil producer from the gains of higher oil prices.

It is unusual for Nigeria’s external reserves to be declining at a time the price of oil has rallied to the highest level since 2014, which should mean more dollar income for oil-exporting Nigeria. Nigeria’s external reserves and excess crude account tend to see accretion in periods of higher oil prices. But that tradition is increasingly fading.

Brent crude, the global benchmark, has risen by 14.6 percent this year alone to $90.5 per barrel, well above the government’s target of $62 per barrel. While oil prices have soared, the external reserves have however declined by 1.3 percent in the same period.

“Nigeria’s reserves are steadily declining due to poor oil revenues,” Tunde Abidoye, an analyst at Lagos-based investment bank, FBN Quest, says in a note to clients. Nigeria’s oil revenues have tanked for two reasons.

First is the rising cost of subsidizing petrol, a wasteful practice the government has stuck with in violation of a law it set itself – the Petroleum Industry Act (PIA). The subsidy payment leaves the state-owned oil company, NNPC, with less cash to remit to the federation account.

The government’s oil revenues look set to turn out even worse this year with a subsidy bill that is estimated by the NNPC to increase to N3 trillion.