The slide of the value of naira has started impacting negatively on Nigeria’s foreign exchange reserve (FER), which has suffered a 15 per cent drop in three months from June to mid-August.
A country’s FER is usually preserved as a back-up for the strength of its local currency against others.
But the collapse of price of oil in the international market, since the beginning of the year, has seen Nigeria, whose revenue is 80 per cent dependent on oil, having its currency, the naira, losing its value to more than 300 per cent against the dollar.
The naira recorded its all time low, exchanging at N400 per dollar at the end of July and is currently exchanging for N386.25 this week at the parallel market.
The Nigeria central bank, in a bid to shore up the currency has resorted to daily sale of dollars to the interbank currency exchange market, a situation experts say, has caused a serious depletion of the country’s FER status this year more than ever before.
Nigeria’s economic recession has seen the country’s FER, which was $42.57 billion in August 2014, reduced to $40.55 in June 2015 and has further suffered its worst shrink of 36 per cent in July 2016, coming to $26.25 billion.
It further fell to $25.11 billion as at August 16, with signs of further reduction before the year runs out.
This is confirmed in the apex banks’ latest data, which it said was attributable to the almost daily intervention to sustain dollar sales to boost interbank liquidity and support the local currency.
“What is the wisdom of retaining high FER when the local currency becomes a mere tissue paper? The CBN should not be blamed for that, rather a better robust economic policy-drive to see Nigeria diversifying its economy is the only way out,” said Dr. Harrson Okon, of Lagos state University.
He said no country’s FER grows under the condition Nigeria currently finds itself without declaring a state of emergency on the economy, in line with the recent advocacy of Nigerian Economic Summit in its recent submission to the government.
It is feared that with naira still going from N365.25 per dollar, at the interbank market, and N386.25 at the parallel market this week, nothing is indicating that Nigeria’s FER will improve in the nearest future.
By Emma Eke…
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