Nigeria’s External Reserves Fall By $5.38bn In 5 Months
Nigeria’s external reserves dropped by $5.38bn between September 6, 2019 and February 6, 2020, figures published by the Central Bank of Nigeria, show.
Foreign exchange reserves are assets held by a monetary authority in foreign currencies.
Comprising of foreign bank notes, deposits, bonds, treasury bills and other foreign government securities, the reserves are used to back liabilities and influence monetary policy.
Data obtained from the CBN on Monday showed that the reserves fell from $43.10bn in September 2019 to $37.72bn in February 2020.
Despite calls by financial experts for a unified currency exchange rate and a market driven forex market, the CBN continues to use FX reserves to support the market.
Why FX Reserves Are Important To Economy
The reserves help the country to meet external obligations with global partners and also absorb shocks from economic crisis.
Why Foreign Reserves Keep Falling
Several factors determine the upward and downward movements in reserves. In Nigeria, they have been mostly influenced by crude oil earnings , foreign inflows into the country and CBN interventions in the foreign exchange market.
Looking ahead, the reserves may even sink deeper due to the recent coronavirus outbreak in China and other countries and the attendant slowdown in the global economy.