Nigeria’s foreign reserves fell by $2.202 billion to $38.318 billion on September 29, 2022, from $40.520 billion on December 31, 2021. Foreign reserves have decreased by 5.42%.
Billions have depleted Nigeria’s foreign exchange reserves of dollars despite rising oil prices this year. Last month, the country’s reserves fell by $706 million, to $39.024 billion on September 1, 2022.
Furthermore, the Nigerian economy is suffering from a lack of foreign exchange as currency traders continue to complain about insufficient forex liquidity, causing the local currency to fall further in the FX market. The forex crisis persists despite the central bank’s intervention in the forex market.
Nonetheless, the official exchange rate has been relatively stable but mostly inaccessible to most Nigerians. At the time of writing, the exchange rate at the investors and exporters window is around N437.03/$1, while the black market rate is around N735/$.
What the CBN is saying
The apex bank would continue its intervention policy hoping that the oil price surge would boost the reserves. This was revealed by the CBN governor, Godwin Emefiele, as he briefed the media following the end of the monetary policy committee meeting.
He said;
the Committee noted the marginal increase of 0.39% in the level of external reserves to US$38.46 billion at end-August 2022 from US$38.31 billion at end-July 2022 despite continued demand pressure. With crude oil price forecast to continue to moderate in the short to medium term, Members urged the Bank not to relent on the various policies put in place to support non-oil exports to shore up external reserves.
What you should know
- According to the Financial Times, the Opec+ oil coalition is considering a significant drop in production to support plummeting prices as the group prepares to meet in person for the first time since March 2020.
- Brent, the international oil benchmark, surged 3% to $87.67 per barrel amid news that the producer group was considering curtailing production. The contract is still significantly below the high of $130/b reached earlier this year in the aftermath of the Russian invasion of Ukraine. Nigeria’s central bank is counting on rising oil prices to enhance its reserves.
- Foreign reserves are assets maintained on reserve by a monetary authority in foreign currencies, according to the Central Bank of Nigeria. These reserves are utilized to sway monetary policy decisions. Foreign currencies, deposits, treasury bills, deposits, and other government securities fall into this category.
- The International Monetary Fund (IMF) asserts that international reserves are those external assets that are available to and are controlled by a country’s monetary authorities.
- Nigeria’s external reserve is very important in defending the naira and is used to cover the country’s huge import bills. An increasing external reserve suggests a higher inflow from crude oil earnings, inflow from foreign investors, and external loans.
