Nigeria’s external reserves fell to $37.95billion as of October 12, 2022, maintaining their downward trend in recent weeks, data obtained from the Central Bank of Nigeria (CBN) shows.
This means that the reserves have dropped below $38billion for the first time in over a year.
The external reserves which stood at $40.53billion as at the end of December 2021 have fluctuated for most part of this year despite the Ukraine crisisinduced high prices of oil (the commodity that accounts for over 70 per cent of the country’s forex earnings). CBN data indicates that the reserves have been steadily heading south since September 9, 2022.
With the reserves standing at $38.252 billion as of September 30, 2022, it means that between that date and October 12, 2022, the CBN’s dollar buffers dropped by $305.15million.
In the communique it issued at the end of its meeting on September 27, the apex bank’s Monetary Policy Committee (MPC) stated that the external reserves increased marginally by 0.39 per cent to $38.46 billion at end-August 2022 from $38.31 billion at end-July 2022, “despite continued demand pressure.”
Analysts attribute the decline in the external reserves in the last few weeks to the interventions that the CBN is making in the foreign exchange market, which are aimed at tackling acute fx scarcity that has resulted in the weakening of the naira in both the official and unofficial (parallel) markets.
In a recent report, analysts at CSL Research predicted that as the CBN continues its interventions in the Investors and Exporters’ (I&E) window, the country’s external reserves could drop to $35billion by the end of this year.
They noted that a $35billion external reserves level would cover the import of goods and services import of between five and six months, adding that “with that reserve level, we expect the CBN to maintain its current monthly intervention in the FX market.” As the analysts put it, “the recent shortage in dollar supply amidst increased demand has worsened the pressure on the naira.
Though the exchange rate at the I&E window has remained stable due to the sustained intervention in the FX market by the CBN, there has been considerable depreciation at the parallel market.
“It has become increasingly difficult for Nigerian students studying abroad to access the funds they need for their fees and upkeep because of the FX shortage in the county as many commercial banks now take a much longer time to process FX demands via Form A.”