External reserves lose $1.2bn amid rising dollar demand

The country’s external reserves have dropped by $1.16bn in five weeks, figures obtained from the Central Bank of Nigeria have shown.

An analysis of the movement of the foreign reserves on the CBN website on Friday showed that the reserves which stood at $38.92bn as of September 9, 2022, fell to $37.76bn as of October 18, 2022.

This means the reserves lost $1.16bn within the period, indicating that the apex bank was honouring some obligations that were due and escalating efforts to defend the local currency.

At the last Monetary Policy Committee meeting in September, the members of the policy body had urged the CBN not to relent on the various policies put in place to support non-oil exports to shore up the external reserves.

However, economic experts have attributed the major cause of the falling reserves to forex interventions deployed by the apex bank to address the forex crisis in the aviation sector, and the continuous injection of foreign exchange to defend the naira value.

The Managing Director/Chief Executive Officer, Cowry Asset Management Limited, Mr Johnson Chukwu, noted that there was shortage of dollar inflow in the economy.

“There is low dollar inflow, and what the CBN has, it is using it to defend the naira,” he said.

A professor of Economics and Public Policy at the University of Uyo and the Chairman of the Foundation for Economic Research and Training, Prof. Akpan Ekpo, recalled how the CBN intervened in the aviation forex crisis.

He said, “One of the major needs that the reserves was used to meet is the airlines. If you recall, the airlines were shutting down. The reserved were also used for normal settlements of other obligations.”

The Central Bank of Nigeria had announced the released $265m to airlines operating in the country, to settle outstanding ticket sales to check crisis in the country’s aviation sector.

There had been serious concerns and reactions over the inability of foreign airlines operating to repatriate over $450m ticket sales proceeds out of the country, fuelling concerns over investors perception about Nigeria.

International airlines operating in the country had raised airfares and cut flights over their inability to repatriate funds to their home countries.

Some airlines also threatened the suspension of their flight operations in the country.

According to the CBN, the breakdown of the aviation intervention indicated that $230m was released as special foreign exchange intervention while another $35m was released through Retail SMIS auction

The Governor, CBN, Godwin Emefiele, launched the ‘RT200 FX Programme’ earlier in the year to boost forex supply in the country through the non-oil sector in the next three to five years.

“The RT200 FX Programme is a set of policies, plans and programmes for non-oil exports that will enable us attain our lofty yet attainable goal of $200bn in FX repatriation, exclusively from non-oil exports, over the next three to five years,” he said.