By Lucy Adautin
Nigeria’s foreign reserves have dropped to $32.29 billion, marking a six-year low in the Central Bank’s efforts to stabilize the naira.
This level represents the lowest point since September 25, 2017, when it stood at $32.28 billion.
Since March 18, when the naira began its recovery from record lows against the dollar, the country’s foreign reserves have dropped by 6.2 percent, losing $2.6 billion.
As of Monday, based on the latest data from the CBN, the reserves stood at $32.29 billion. At the start of the month, the reserve was at $33.57 billion, before declining further to $32.6 billion by April 12.
This comes as the CBN has attempted to save the naira through various interventions such as raising interest rates to 24.75 percent and managing foreign exchange trades.
It stepped up its intervention in the FX market with sales at both the official market and to BDC operators who sell dollars on the streets.
The central bank, which provides $10,000 to each BDC every week, has instructed them to only sell at a spread of 1.5 percent, equivalent to N1,117 per US dollar.
The rate offered by the BDCs has established a de facto floor for the naira in the black market since the central bank resumed sales to them in February.
Also. Last month the CBN said it had cleared a backlog of $7 billion since the beginning of the year. That was built over the years as the central bank pegged its currency against the dollar, leading to a scarcity of foreign currency that deterred foreign portfolio investment.
However, it’s unclear how much dollar debt the CBN retains on its books
Akpan Ekpo, a professor of economics and public policy, said the CBN’s managed float system in which it is trying to ensure supply and curtail demand is not sustainable in the long term.
He said the CBN needs to be careful with how it depletes the foreign reserves as its main source is oil revenue.
“We need to manufacture non-oil goods and services, export them, and get foreign exchange and not depend on oil income,” he said.
Meanwhile, the Organization of Petroleum Exporting Countries (OPEC) report showed that Nigeria’s production of crude oil fell for the second time this year in March.
Oil production was down from 1.32 million barrels per day in February to 1.23 million barrels per day in March, according to data from the most recent monthly oil market report published by the International Monetary Fund (IMF) recently projected that Nigeria’s foreign reserves are expected to see a significant reduction, falling to $24 billion in 2024.
The IMF anticipates a challenging period through 2024–25 for Nigeria’s financial account, exacerbated by an absence of new Eurobond issuances, significant repayments of existing funds and Eurobonds totalling $3.5 billion, and continued portfolio outflows.
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