External reserves drop by $494m in three weeks

Written by on May 30, 2017

Nigeria’s external reserves, which have been on a downward slide since May 5, 2017, fell to $30.5 billion on May 25, indicating a decline of $494 million in 21 days, data on the Central Bank of Nigeria (CBN)’s website showed yesterday.

The reserves have been rising steadily since March 28, moving from $30.3 billion to $30.988 billion as at May 4.

The steady decline in the external reserves comes even as analysts at Financial Derivatives Company Ltd stated in a note issued at the weekend that: “We expect a further slowdown in the pace of accretion of external reserves, as forward contracts mature, and oil prices remain below $52pb.”

According to the analysts, external reserves of $30.49 billion will cover imports for a period of 6.83 months.

Analysts attribute the steady fall in the reserves to CBN’s aggressive interventions in the foreign exchange market aimed at boosting naira and stabilising the exchange rate.

However, naira yesterday fell to N382 per dollar from N381/$1 last Friday on the parallel market.

The CBN has continued to injec

t fresh capital to boost liquidity in the forex market, last week selling $391.50 million at the interbank window, comprising the spot delivery for invisibles worth $86.50 million and sales to SMEs and wholesale users totaling $50 million and $200 million respectively.

In addition, it also auctioned an undisclosed amount of dollars to settle a backlog of foreign exchange demand for airlines, fuel and raw material importers.

Speaking to journalists last week, Acting Director, Corporate Communications, CBN, Isaac Okorafor, reiterated that CBN will continue to make every necessary interven tion in the interbank market to sustain the supply of forex to meet legitimate foreign exchange demands by customers.

He stated that the efforts of the CBN in sustaining the intervention in the forex market is beginning to post some positive effects, as naira is making steady gain against major currencies.

It will be recalled that the CBN Governor, Mr Godwin Emefiele, had pledged at the end of the Monetary Policy Committee (MPC) meeting last Tuesday that the apex bank will sustain its forex intervention to ensure the convergence of the forex rates.

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