Nigeria's external reserves loses $915 million after naira float as it begins week on a negative note

Nigeria's foreign reserves declined by $915 million after Nigeria's apex bank, the Central Bank of Nigeria (CBN), floated the naira and liberalized the Forex market.

According to data from CBN on Sunday, August 27, 2023, the reserves, which stood at $34.66 billion as of June 14, 2023, when the naira was floated, dropped to $33.74 billion as of August 24, 2023.

The local currency's value closed at N471.67 per dollar at the Investors and Exporters (I&E) window on June 13, 2023, a day before the apex bank announced the Forex liberalization.

Due to the float, the naira depreciated by over $700 per dollar at the I&E window. The naira has traded above N700 per dollar in the official since the float. The local currency traded at N915 per dollar at the unofficial market as dealers and buyers scrambled for dollars.

Findings from Bureau de Change operators indicate that the Pounds Sterling traded at N1,160 and N1,180 as of Friday, August 25, 2023.

The naira began trading on Friday, August 25, 2023, at N773.29 per dollar and hit a high of N799.9 per dollar before closing at N778.42 per dollar.

CBN vows tough against BDCs and currency manipulators

The Acting CBN Governor, Folashodun Shonubi, said during the last Monetary Policy Committee (MPC) meeting that the accumulation of the external reserves remains vulnerable while Forex demand pressure continues.

Punch reports that the Acting CBN governor vowed to save the naira from further decline and to clamp down on illegal dollar supply into Nigeria. The development follows the $3 billion loan by the Nigerian National Petroleum Company Limited (NNPC) from AfreximBank as a temporary buffer to improve the dollar supply in Nigeria.

BDC operators to work with CBN to strengthen naira

Aminu Gwadebe, the Chairman of the Bureau De Change Operators of Nigeria, said that the CBN would be going tough on illegal operators in their efforts to stabilize the naira.

The external reserves are CBN's firepower against the falling value of the naira and provide a buffer for portfolio investors.

Gwadebe said CBN told them that by August 31, 2023, any breaches on the allowable margin of -2.5% and +2.5% on the average weighted rate on the I&E closing date rendition of returns and payment of penalties will lead to the operator's license revocation.

The naira float has caused a surge in inflation in Nigeria, hitting a 17-year high of 24.08% for July 2023. Data from the National Bureau of Statistics revealed that food inflation surged the most during the period under review.