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HomeTop NewsNigeria's forex reserves are down 2.4% y/y to $39.5 bln as naira...

Nigeria’s forex reserves are down 2.4% y/y to $39.5 bln as naira depreciates further

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By Oludare Mayowa

Nigeria’s foreign exchange reserves declined by 2.36 per cent year-to-date to $39.55 billion by March 29, from $40.51 billion on January 4, 2022, according to data sourced from the Central Bank of Nigeria (CBN) website on Thursday.

The data on the website of the regulatory bank also showed that the country’s dollar buffer was down by as much as $31 million in a month, representing 0.77 per cent decline.

The foreign exchange reserves stood at $39.86 billion by February 28, 2022.

Analysts claimed that despite the rising global oil price, this has not translated into higher revenue for Nigeria nor increased accretion to the forex reserves due to huge oil theft, which deprived the country of meeting its crude oil production quota.

Reports showed that about 90 per cent of Nigeria’s crude oil production outputs are stolen by a syndicate that specializes in stealing crude oil through the pipelines and from the loading bay in Niger Delta.

However, the country’s dollar buffer grew 13.78 per cent year-on-year from $34.76 billion on March 29, 2021, according to data sourced from the CBN website.

Consequently, upon the decline forex reserves, the local currency has remained under pressure with the naira trading at N417 to the dollar on the I&E forex window on Wednesday, weaker than N411 to the dollar in the beginning of the year.

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Also, the naira has depreciated to around N585 to the dollar in the Peer-to-Peer (P2P) market against N570 to the dollar earlier in the year.

Bureau de change operators said the local currency could cross the N600 to the dollar psychological threshold in a few months’ time as dollar scarcity bite harder in the face of dawdling foreign exchange inflow into the country.

Some banks cut the dollar spending limits on local currency cards to free more resources to fund imports after the CBN signalled it will stop foreign-exchange sales to banks.

United Bank for Africa Plc stopped the use of naira card to withdraw dollars from automated teller machines outside the country or make international payments at the point of sale devices.

Zenith Bank Plc said it “temporarily suspended” the same transactions on ATM and POS devices. It cut spending limit on web transactions using naira cards to $20 a month from $100, citing “today’s economic realities” in a note to customers.

First Bank of Nigeria Ltd. set the limits on its naira Mastercard and naira credit card to $50 monthly.  UBA’s plan is to cut down on those transactions that would require it to start looking for foreign exchange, Chiugo Ndubisi, the executive director said at an investor call in Lagos.

“We want to encourage as much as possible situations where customers are able to access dollars that they have deposited in banks through their domiciliary accounts,” Ndubisi said.

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