External reserves reduce to $37.7b under foreign exchange pressure
By Jeph Ajobaju, Chief Copy Editor
External reserves slid to $37.7 billion on 18 October, the lowest this year, highlighting the turbulence in foreign exchange (forex) where demand pressure in the black market traded the naira at N745/$1 on Thursday.
Parallel market naira exchange rate fell 24 hours later, sliding to N755/$1 on Friday.
Exchange rate at the investors and exporters window, where forex is traded officially, had closed at N441.5/$1 on Wednesday, a drop of 0.06 per cent from N441.25/$1 the previous day.
Central Bank of Nigeria (CBN) data shows external reserves stood at $37.76 billion on Tuesday, a decline of 0.1 per cent against $37.96 billion on Monday.
Foreign reserves have been on a downward trend due to the continuous intervention by the CBN in the official forex market to maintain the stability of the naira.
Foreign reserves are mostly funded through a combination of government’s share of crude oil exports, foreign loans or grants, and capital importation, per Nairametrics.
The CBN uses the reserves to augment forex demand at the I&E window even though the United States dollar is sold at official rates, rather than the going rate in the black market.
The current level of below $38 billion is the lowest this year and is likely to keep trending downward due to flooding and oil theft.
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Naira to fall further
A recent report said Bank of America projected the naira official exchange rate could be devalued to N520/$ in 2023 because it is currently well above fair value.
This was disclosed by Bank of America Economist Tatonga Rusike in a note to clients seen by Bloomberg.
The CBN currently adjusts the naira exchange rate via the I&E window and has done so severally this year. But it is inconsequential due to the disparity between official rates and black market rates.
The wider the rates the less important the official rate becomes.
Naira down to N755/$1, the lowest black market record
Parallel market exchange rate between the naira and the dollar dropped to N755/$1 on Friday, down from N742/$1 on Thursday, according bureau de change (BDC) operators who spoke to Nairametrics.
Nairalytics exchange rate tracker shows the N755/$1 rate is the lowest on record, a differential of N313.87/$1 between the official market and the black market.
Peer-to-peer cryptocurrency exchange rate fell to N751.99/$1 on Friday morning from N748.7/$1 the previous day.