Nigeria’s foreign exchange reserves down $243 mln in 1-month ~CBN
By Bankole Samuel
Nigeria’s foreign exchange reserves fell 0.68 percent month-on-month to $36.01 billion by July 22, from $36.26 billion a month earlier, data from the Central Bank of Nigeria (CBN) showed on Friday.
The country’s forex buffer has declined by as much as 6.54 percent year-to-date as the West African country suffered decline revenue in the wake of the outbreak of coronavirus pandemic and the subsequent disruption in global supply chain which impacted its mainstay export commodity, crude oil.
The foreign exchange reserves opened the year at $38.53 billion by January 2, and gradually declined as the global oil prices collapsed below the country’s estimated $57 per barrel of oil benchmark for its 2020 budget.
The government has since revised its projected revenue from crude oil downward to reflect the reality of the market.
Minister of finance and budget, Zainab Ahmed said the country revenue from the oil and gas sector recorded a shortfall of about N1.92 trillion from projected earning in the first quarter of the year. Nigeria earned a total of N1.38 trillion revenue from the sector in the first three months of the year as the global oil market experienced instability due to the twin challenges of disruptions in the global supply chain and the initial price war between Russian and Saudi Arabia, the two world largest oil producing, leaving prices spiraling downward.
The nation’s forex buffer had peaked at $36.59 billion by May 29, after the inflows of dollars from money recovered from Late Sani Abacha loots and credit facilities from the International Monetary Fund (IMF).
However, the reserves started a gradual decline after the CBN reopened the domestic foreign exchange markets to finance major supplies in the economy.
The reserves stood at $36.57 billion by June 3, a month ago while the figure for July 2, was lower than $38.53 billion at the start of the year.
In April, the IMF approved and disbursed $3.4 billion in emergency financial assistance under the Rapid Financing Instrument (RFI) to support the authorities’ efforts in addressing the severe economic impact of the COVID-19 shock and the sharp fall in oil prices.
Also, in May Nigeria received $312 million recovered loot by the late military doctor Abacha from the United States and Jersey Island, beefing up the country’s forex reserves.
The CBN had adjusted the exchange of the naira twice this year, first in March to N360 per dollar from N307 it has traded since 2017 and then another adjustment in June to reflect the agreement with the IMF for a unified exchange rate regime.
Pressure has remained mounted at the domestic foreign exchange market due to a shortage of dollar inflow with the local currency taking the hit at the parallel market.
The naira closed weaker at N472 to the dollar on Thursday from N470 it closed the previous day while it closed marginally up by 0.04 percent at the Investors’ and Exporters’ (I&E) window on Thursday as the dollar was quoted at ₦388.00 as compared to ₦388.17 on the previous day.
The backlog of demand from offshore portfolio investors, who had sold down their holdings in the debt and equity markets has peaked stood around $7 billion by July, but the CBN said many of them may have to wait for the country to finance essential sectors in a bid to steer the country away from recession.