Nigeria’s forex buffer again on decline after initial gains from IMF, Abacha loot
Nigeria’s external forex reserves fell to $36.47 billion by June 10, the lowest since May 27 when it stood at $36.40 billion as the country gradually ease restrictions precipitated by the spread of coronavirus.
The country’s foreign exchange buffer has peaked at $36.59 billion on May 29, before it started a gradual decline after the Central Bank of Nigeria (CBN) reopened the domestic foreign exchange markets to finance major supplies in the economy.
Nigeria had built up its external reserves in the wake of inflows of dollars from loans from the International Monetary Fund (IMF) and recovered stolen money from late Sani Abacha.
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.
Analysts said the decline in the country’s foreign exchange buffer are signs of fresh pressure on the local currency as the economy gradually reopens after more than two months of lockdown to curtail the spread of coronavirus pandemic.
The backlog of demand from offshore portfolio investors, who had sold down their holdings in the debt and equity markets has peaked stood around $1.5 billion, 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.
The naira traded at N450 to the dollar on the parallel market on Friday and closed down by 0.31 percent to N385.75 at the Investors’ and Exporters’ (I&E) forex window on Thursday.