Nigeria’s external reserve declined by $167m amid fall in naira

As the naira continued to depreciate against the dollar in July, the nation's foreign reserves lost $167.2 million.

Data on the movement of foreign exchange reserves obtained from the Central Bank of Nigeria revealed that the reserves, which stood at $34.12 billion on June 30, 2023, had decreased to $33.95 billion as of July 28, 2023.

This is on the back of a fall in the value of the country’s currency. The naira dropped from 820/$ to 868/$ over the previous two weeks on Monday at the parallel market.

Also, Naira trading at the I&E window on the FMDQ started at 784.91/$ and ended at 756/$ after reaching an all-time high of 830/$.

Legit.ng earlier reported that 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 19, 2023.

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.

There is a growing demand for dollar

Aminu Gwadabe, the president of the Association of Bureau de Change Operators of Nigeria, told Punch that the continued lack of trust in our local currency is causing optimism to give way to pessimism, which is further encouraging hoarding and speculating of the FX holding position.

He said that the market's limited supply of dollars is under pressure from the growing demand from oil marketers, investors' backlog, school tuition, and travelers.

He asserted that further foreign financing, either bilaterally or multilaterally, is required to increase liquidity in order to assuage the local currency's impending crisis.

The acting governor of the Central Bank of Nigeria, Folashodun Shonubi, stated at the most recent meeting of the Monetary Policy Committee in Abuja that the bank will address the demand pressure on the country's currency rate as the naira continued to weaken against the dollar.

While pressures on foreign exchange demand continued, the growth of external reserves remained sluggish, he noted.

Shonubi said: The market needs to find its level. There is pent-up demand which the market cannot cater to. Once we clear this demand, the volatility will normalize. We have started intervening, and we would continue to intervene until the market gets to our level.