– Says Nigerians’ Preference For Imported Products Still High
The $34.9bn external reserves of the Central Bank of Nigeria can only finance about six months of the country’s importation of goods and services.
The apex bank stated this in its monthly economic report which was obtained on Thursday in Abuja.
Foreign exchange reserves are assets held in reserve by a monetary authority in foreign currencies. These reserves are used to back liabilities and influence monetary policy.
They comprise foreign banknotes, deposits, bonds, treasury bills and other foreign government securities.
These assets serve many purposes but are most significantly held to ensure that a government or its agency has backup funds if their national currency rapidly devalues.
In recent times, the nation’s external reserves have been on a decline owing to the drop in oil receipts and the intervention of the CBN in the foreign exchange market.
Nigeria’s reserves have also been largely impacted by the Covid-19 induced crash in crude oil prices which sold for less than $20 per barrel in April.
Data obtained from the CBN showed that the stock of external reserves fell by 1.7 per cent and 9.9 per cent to $34.97bn at end-November 2020, below the levels of US$35.58bn and $38.8bn at end-October 2020 and end November 2019, respectively.
This was due, mainly, to increased interventions in the Investment and Exporters, Secondary Market Intervention Sales and Bureau De Change segments of the foreign exchange market.
The performance of the external sector, according to the Report improved in the review period, owing to the gradual rebound in economic activities that led to improvements in both trade and capital flows.
The data also showed that aggregate external trade and capital inflow increased above levels in October 2020.
For instance, the value of aggregate external trade rose by 3.1 per cent to $7.76bn in November 2020, compared with $7.53bn in October 2020.
The apex bank said the rise in aggregate external trade reflected increased export of goods and higher demand for imports, particularly raw materials.
In the same vein, it stated that a total of $0.33bn new capital was imported into the economy in November 2020, compared with $0.19bn in October 2020.
To help liberalise and improve liquidity in the foreign exchange market, the CBN had announced the amendment of procedures for the receipt of Diaspora remittances on November 30, 2020.
The beneficiaries of remittances have the option of receiving their funds in foreign currency (US Dollars) or transferring into ordinary domiciliary accounts.