Currency speculators to lose out as external reserves hits $35.77bn

Nigeria’s external reserves has been boosted as it went up to $35.77 billion. Despite the volatility in the foreign exchange market due to decline in crude oil export earnings, the external reserves increased sharply by almost $1 billion in just 9 days, rising from the $34.78 billion that it recorded on May 12, 2020, to about $35.77 billion that it ended with on May 21, 2020. 

The reserves had gone down last year, having lost $11.75 billion within a space of 10 months due to fall in oil prices and increase in demand for foreign exchange by Nigerians. The new momentum in the increase in Nigeria’s external reserves appears to have been sustained as it recorded a third consecutive week of growth at the end of last week. Available data on Central Bank of Nigeria (CBN) website showed that the country’s external reserve had risen to $35.77 billion as of May 21, 2020. 

Nigeria’s external reserves have been on a steady increase since April 29, 2020, when it stood at $33.42 billion. This represents an increase of about $2.35 billion or 7% in 21 days. The recent gradual increase of the external reserves and improved liquidity in the foreign exchange market, has helped to strengthen the Naira at the Investors and Exporters (I&E) window. This was especially the case last week when the Naira exchanged at N385.94 to a dollar from N386 to a dollar.  The improved liquidity in the foreign exchange market and the continuous increase in the country’s external reserves were also made possible by the recent disbursement of $3.4 billion emergency facility by the International Monetary Fund (IMF) to the CBN on May 6, 2020. The money was intended to help Nigeria mitigate the impact of the coronavirus pandemic. 

The Naira has been under attack by currency speculators who have been making a lot of demands for dollars so as to make profits on future sales. Just last week, the CBN warned speculators and businesses to stop patronising the parallel market operators. According to him, the rates they are buying dollar now are unrealistic and possibilities abound that they will lose their money if they continue to do so. It has been estimated that speculators could incur over N10 billion losses. Going forward, Governor Emefiele promised more liquidity in the forex market, assuring that all genuine dollar demands by businesses and individuals will be met. This is coming against the backdrop of the planned resumption of dollar sales to the Bureau De Change Operators (BDC) by the CBN after almost 6 weeks that was suspended due to the lockdown occasioned by the coronavirus pandemic. The President of Association of Bureau De Change Operators (ABCON), Aminu Gwadebe, had pointed out that the return of the BDCs to the forex market will help chase away speculators, curb rising inflation, boost productivity and employment, enhance price discovery, enhance market transparency and competitiveness.