- Nigeria’s foreign reserves continue its downward trend despite recent reforms embarked by the Central Bank of Nigeria
- The latest data from the CBN shows that Nigeria’s reserves is now at a two year low amid reduced earnings from crude oil sales.
- The foreign reserves is a key firepower for CBN in its fight to ensure naira stay strong against other currencies
Nigeria’s foreign reserves which gives the Central Bank of Nigeria (CBN) the firepower to defend the naira has declined to two-year low.
According to the latest data obtained from CBN’s website, Nigeria’s foreign reserves dropped to $33.98 billion Wednesday, July 19th, 2023.
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Source: Getty Images
This is the lowest level Nigeria’s foreign reserve has touched since August, 30, 2021 when it was $33.93 billion
Nigeria’s reserves has been on a downward trend despite expectations that the CBN decision to float the naira will lower the pressure on the foreign reserves.
In a recent note by FBN Quest, a Lagos-based investment firm reads
“A key benefit of the policy is the elimination of losses resulting from the arbitrage spread, which could help alleviate pressure on the gross official reserves
“Provisional data from the CBN shows that the regulatory bank’s total FX sales through its official windows amounted to almost $15.3 billion in 2022, resulting in an estimated opportunity cost of approximately N4.6 trillion”
Monthly breakdown of Nigeria’s foreign reserves in 2023
- January 31: $36.99 billion
- February 27: $36.67 billion
- March 31: $35.49 billion
- April 28: $35.25 billion
- May 30: $35.09 billion
- June 30: $34.11 billion
- July 19: $33.98 billion
What are foreign exchange reserves, and why are they important?
Foreign exchange reserves are assets denominated in other currencies, like dollars. The reserves are utilised to back up liabilities and influence monetary policy.
Foreign reserves serve as a buffer to support the stability of the Nigerian currency in the international foreign exchange market.
When the CBN intervenes in the foreign exchange market, it uses its foreign reserves to influence the supply and demand of the naira.
The foreign reserves also serve as a means to protect against external shocks and ensure the country’s ability to meet its international obligations.
Naira bounces back as dollar exchanges same rate in official, black FX markets
Meanwhile, in another report, the naira to the dollar exchange rate at the official and black markets met for the first time in eight years and closed at N756.
This followed the recent foreign exchange reforms embarked upon by the Central Bank of Nigeria (CBN).
Kingsley Obiora, the CBN’s deputy governor, has further explained the ongoing operational reforms in Nigeria’s foreign exchange markets.
Source: Legit.ng
