Nigeria’s External Reserves Fall 13.76% In One Year To $36.8 Bln
Nigeria’s external reserves continue to decline in spite of measures adopted by the regulatory bank to curtail rapid fall in the foreign exchange buffer for the country.
Data obtained from the Central Bank of Nigeria (CBN) on Thursday showed that the country’s external reserves dropped by 4.36 percent year-to-date by February 18, 2020.
The nations forex buffer stood at $36.85 billion by Feb. 18, 2020, compared with $38.53 billion the reserves started the year, the data showed.
Also, the forex buffer declined 13.76 percent year-on-year by Feb 18, 2020, coming down from $42.73 billion in the same period of last year.
The federal government withdrew about $253.15 million from the country’s excess crude savings between January and February this year.
It was reported at the end of February meeting of the Federation Account Allocation Committee (FAAC) in Lagos on Wednesday that the excess crude account savings have been depleted to $71.81 million by Feb.19.
Nigeria continues to prop up its currency by heavily injecting dollars into the domestic foreign exchange market, a situation the International Monetary Fund (IMF) had condemned and call for a reversal.
The IMF in a report on Nigeria released on Tuesday said Nigeria should adopt a more flexible exchange rate mechanism to reduce its intervention in the fx market.
Last month, the CBN hike cash reserve requirements (CRR) for banks to 27.5 percent from 22.5 percent previously in a bid to curtail liquidity surge in the banking system and help deflect demand on available dollars.
The persistent decline in the nation’s foreign exchange reserves at a time the oil price is going for $59.92 per barrel at the international market is causing concerns among analysts who had expected some accretion into the reserves instead of decline.
The decline is being attributed to the persistent injection of the dollar into the domestic forex market to support the local currency and huge deficit financing by the government.
Nigeria forex reserves are built from excess crude oil account and an increase in dollar earning from other sources, however, earnings from crude oil have been inadequate due to the inability of the country to meet is set production target.
In a bid to curtail pressure on the local currency, the CBN last week adopted a new 5-year naira future contracts, to extend the maturing contract and reduce pressure from offshore investors on the available dollar.
Analysts at the United Capital Plc said the measure could lead to huge losses for the regulatory bank in the event of a sudden depreciation on the local currency beyond the present limit.