Nigeria’s foreign exchange reserves, a once-robust bulwark against economic shocks, have dwindled by $3.8 billion, which is around 10.2 percent in recent months, to $33.31 billion.
This is based on data obtained from the website of the Central Bank of Nigeria (CBN) between January and October (October 25) of 2023, reports Nigerian Tribune.
Nigerian Tribune analysis shows that this is the lowest level for the reserve since July 2021 when it hit a low of $33.09 billion.
Experts from Cowry Assets Management Limited said Nigeria’s inability to reap from the windfall that hit the global oil market, following the geopolitical unrest in the east of Europe since February of 2022 has taken a toll on the economy as well as the lack of dollar liquidity within the central bank’s vault to defend the naira.
This, however, has led to the apex bank relying on the reserves for its continued defense of the local currency in the foreign exchange market.
“Thus, we can say that the steady decline in gross official reserves, coupled with FX liquidity constraints has resulted in a weakening of investor confidence and a general loss of appetite by the offshore community.
“Notwithstanding, we can point fingers to a number of factors behind this decline. One is the rising cost of imports, driven by factors such as the war in Ukraine and supply chain disruptions,” the experts stated.
But a first glance at the total reserves as of mid-October 2023 portends that it can cover about eight months of merchandise import on the basis of the balance of payments for the 12 months to December 2022 and almost seven months when services are added.
Meanwhile, FMDQ’s data shows that monthly transactions on the Investors’ and Exporters’ (I&E) FX window for nine months 2023 are currently running at an average of $2.1 billion, compared with $2.4 billion over the comparable period of 2022.
In August 2023, JP Morgan, a significant player in managing Nigeria’s external reserves, released a report that offered insights into the country’s net reserve position.
According to their estimations, Nigeria’s net reserve position was approximately $3.7 billion.
