CBN reports $950m dip in external reserves after a peak at $34.45b
By Jeph Ajobaju, Chief Copy Editor
External reserves have dropped by about $1.02 billion within 18 days as the Central Bank of Nigeria (CBN) steps up efforts to prop the naira in the foreign exchange (forex, FX) market.
The reserves stood at $34.45 billion on March 18 but dipped to $33.50 billion by April 3, according to the latest data from the CBN.
Before the current decline, the reserves had been steadily growing, witnessing a remarkable 43-day surge between February 5 and March 18, during which it appreciated by $1.28 billion.
The CBN attributed the rise to increased remittance payments from diaspora Nigerians and heightened interest from foreign investors in local assets, including government debt securities.
Forex market reforms and a rise in oil production also contributed to boosting the reserves.
However, the trend since March 18 shows a significant drawdown. After peaking at $34.45 billion it gradually declined to $34.39 billion on March 19, then $33.57 billion by April 2, and finally $33.50 billion by April 3.
This rapid decline of $1.02 in 18 days underscores the pressure on the reserves as efforts continue to stabilise the local currency.
The CBN has been actively intervening in the forex market to support the naira, which has faced pressure from various economic factors. These interventions often involve the sale of dollars withdrawn from the reserves to maintain forex liquidity.
In the 18-day period, the CBN made two significant announcements – it declared the complete clearance of valid foreign exchange backlog and facilitated the sale of forex to Bureau De Change (BDC) operators at N1,251/$1.
Externals reserves usually reflect a country’s balance of payments and its ability to meet international obligations. A substantial decline in reserves can erode investor confidence and lead to a credit rating downgrade that impacts borrowing costs.
The International Monetary Fund (IMF) recently projected Nigeria’s reserves would plummet to $24 billion by 2024.
The IMF foresees a challenging period for Nigeria’s financial account through 2024-2025, driven by the absence of new Eurobond issuances, substantial repayments of existing funds and Eurobonds totalling $3.5 billion and continued portfolio outflows.
Abuja has, however, said it will issue domestic bonds denominated in foreign currency in the second quarter of 2024, precisely in June, a move which some economists believe would stabilise the naira and external reserves.
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