Foreign reserves continues free fall, drops by $559m in 2 weeks

Nigeria’s foreign reserves has continued its free fall, declining from $39.8 billion to $39.24 billion between 11 November and 13 December this year, the latest data obtained from the Central Bank of Nigeria (CBN) said.

Between October 2 and October 31, 2019, the reserves had shed $1.26 billion, falling from $41.76 billion to $40.5 billion.

The report further revealed that the reserves plunged from $45.14 billion to $44.65 billion between July 8 and August 8 this year, representing a negative growth of $482.18 million or 1.1%.

Godwin Emefiele, the apex bank chief, had at a recent function alerted the country to the danger of its overreliance of crude oil for more than 60 per cent of its fiscal revenue and over 90 per cent of its forex inflows.

He noted that the shocks and strains of the global oil market weighed down entirely on the economy through the forex markets as manufacturers and traders, needing forex for input purchases, were confronted with limited supplies.

Mr Emefiele disclosed that “Average monthly inflows of forex into the CBN fell from over $3.4bn in June 2014 to a low of $1.4bn in September 2016. The decline in forex earnings was further complicated by the foreign capital flow reversals due to rising yields in the USA. The impact on our economy was evident in the rising pressure on the naira-dollar exchange rate.

“With the drop in forex inflows, the exchange rate at the parallel market rose from about N200/$ in August 2015 to N525/$ in February 2017. Inflation also rose from 9.6 per cent in January 2016 to over 18.7 per cent in January 2017.

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“Our external reserves fell from about $31bn in April 2015 to $23bn in October 2016, and activities in the industrial sector witnessed a lull as manufacturers struggled to get access to key inputs needed in the production process.”

He further mentioned that the apex bank initiated a demand management approach, which aimed to maintain the country’s reserves and boost the local manufacturing of certain goods in Nigeria.

“The introduction of the I&E window, along with improvement in domestic production of goods, has helped shore up our external reserves. Transactions have reached over $55bn since the inception of the window and our foreign exchange reserves has risen to $42bn in September 2019 from $23bn in October 2016.

“Nigeria’s current stock of external reserves is now able to finance over nine months of current import commitments. With improved availability of foreign exchange, the exchange rate at the I&E forex window has remained stable over the past 24 months at an average of N360/$, and the parallel market exchange rate has appreciated from N525/$ in February 2017 to N360/$ today,” he said.

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