Nigeria’s external reserves drop to $36.3bn

The nation foreign currency reserves dropped to $36.3 billion losing $261 million in 15 days. Data published by the apex bank in its website showed that Nigeria’s external reserve is now $36.3 billion as at 18th June 2020.  According to CBN data Nigeria’s  external reserve position as at 3rd June was $36.57 billion. The drop is as a result of the ever rising demand of Nigerians for importation despite the global economic lockdown and the limited dollar revenue due to stiff OPEC cuts and low crude oil prices. 

Nigeria’s external reserve has declined for a second consecutive week since June 3, 2020, when it stood at $36.577 billion. This represents a decline of $261 million or 0.71% in 15 days when compared to the $36.316 billion as of June 18, 2020. The Naira  has been under pressure against other major currencies, particularly the dollar, since the fall in oil prices and the outbreak of the COVID-19 pandemic. This has triggered a wave of currency speculators who believe the devaluation which occurred in March should be have been more. 

The CBN devalued it’s the official exchange rate in March from N307/$1 reacting to the fall in crude oil prices. However, Brent crude oil prices have risen since then to over $43 per barrel but yet to hit pre-crash level prices. Speculators are betting that the government may devalue further if they are to fund the government’s huge revenue gap. However,  dollar shortages, which is impacting on the external reserve continues thus widening the exchange rate at the I&E window and the parallel market. Federal Government through the Economic Sustainability Committee had proposed the unification of the exchange rate to maximise Naira returns to FAAC from the foreign exchange inflows. 

The policy measures by the committee is also to help manage the exchange rate in a sustainable manner. As part of the measure to improve the foreign exchange supply to CBN, the committee had recommended the sales of foreign exchange supply directly to the apex bank by oil companies and oil service companies instead of NNPC. The Naira depreciated to N386.50 to a dollar at the Investors and Exporters (I&E) window last week Friday. It also depreciated to N455 to a dollar at the parallel market otherwise known as the black market.