CBN sees foreign reserves falling under $34bn by Dec amid fast-depleting export income

The Central Bank of Nigeria (CBN) said it expects Nigeria’s international reserves, which opened at $38.100 billion in January to close the year anywhere between $29.9 billion and $34 billion as Africa’s biggest economy confronts an export revenue crisis triggered by the weight of the coronavirus pandemic on receipts from sales of oil, its biggest foreign exchange earner.

“Specifically, the degree of external reserves accumulation is expected to decelerate, as outflows are expected to outweigh inflows.

“As a result, external reserves are expected to lie between $29.9 billion and $34.3 billion at end-December 2020 (predicated on current declining oil price between $20 and $40),” the regulator said in its Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2020/2021, issued on Sunday.

Nigeria’s foreign reserves had been fast depleting from January till April, when it touched a year-to-date low of $33.440 billion in April before a $3.4 billion credit from the International Monetary Fund came along that helped it bottom out, after falling without cease for at least eight consecutive months.

Read also: Foreign reserves grew only marginally in September –CBN data

It climbed marginally by $58.464 million or 0.16% to $35.724 billion by 29^th September, having risen from $35.665 billion a month before.

“This development, in addition to exchange market pressures, emanating from speculative activities in the BDC and I & E segments of foreign exchange market, is expected to exert pressure on the naira exchange rate.

“In addition, increased risk aversion behaviour by investors may negatively impact on capital inflow, as they flee to safe-haven assets,” the CBN report added.

The reserves hit a six-year peak at the beginning of January 2019 at $43.075 billion, a milestone yet to be bettered since that point.