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Despite subsidy removal, foreign reserves drop 0.75%

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Nigerian economists say economy heading for recession

In spite of government’s hopes that the removal of subsidy on fuel products will shore up Nigeria’s foreign reserves, the external reserves dropped by about US$200 million representing about 0.75 per cent.

Speculations were rife in government’s circles that the new policy on downstream oil sector liberalization would extend its foreign exchange-related pressures on the reserves.

But this was not the case, as gross foreign reserves opened at USD26.787 billion on Thursday, May 12, a day after the Federal Government announced liberalization of petrol imports, and at close of business last Thursday, May 19, the reserves was USD26.587 billion.

Read also: IPMAN, firm sign MoU on oil supply deal

Government’s directive to marketers to look to the autonomous market for sourcing of required foreign exchange immediately sparked off speculative pressures on the parallel market.

At 0.75 per cent decline, the reserves went down at higher rate week-on-week compared to the preceding week decline of 0.49 per cent, even as the Central Bank of Nigeria, CBN, maintained its usual trading positions in terms of volume band and exchange rate.

Meanwhile, it was gathered that the apex bank may have ignored pressures for special allocation to petroleum marketers seeking foreign exchange for their imports.

It has been the norm in the official weekly foreign exchange transactions for CBN to direct special allocations to some targeted economically important business units.

 

 

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