Nigeria’s foreign reserves slumped from $36.57 billion to $36.2 billion in the period between 1st and 29th June, equivalent to a depletion of $373.23 million, data gleaned from the Central Bank of Nigeria’s (CBN’s) on Thursday revealed.
The reserves attained a high of $45.17 billion on 11th June 2019 but saw a dramatic fall of $11 billion between that time and 28th April 2020, when the figure stood at $33.89 billion.
On Wednesday, U.S. credit rating agency, Moody’s Investors Service, disclosed that Nigerian banks’ foreign currency gap could leap to $5 billion by reason of disrupted foreign inflows, low oil prices and poor remittances triggered by the coronavirus outbreak.
It observed in a report tagged “Renewed Foreign Currency Shortages Highlight Vulnerability for Banks” that these difficulties might cause a repeat of the foreign currency liquidity pressures that constrained Nigerian banks foreign exchange operations during the oil crash of 2016-2017.
Read also: Uncertainty and Nigeria’s foreign reserves
Peter Mushangwe, banking analyst at Moody’s, said “lower dollar inflows at a time when foreign currency borrowing will likely be more expensive for Nigerian banks will strain their foreign currency funding, despite substantial improvements compared to 2016.”
He went further to say that “our moderate scenario where foreign-currency deposits decline by 20 per cent, while loans remain constant, would increase rated banks’ funding gap to N1.5 trillion ($3.8 billion), and to N1.9 trillion ($5 billion) under our severe-case scenario of 35 per cent foreign-currency deposit contraction, creating acute funding challenge.”
During the last Monetary Policy Committee session, Godwin Emefiele, the CBN Governor, emphasised government’s need to scale down its dependence on oil money through economic diversification and broadening of its income sources.
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