Nigeria’s Foreign Reserves Lost $316.7m In March As Battle To Save Naira Continues

Nigeria’s foreign reserves lost $316.66m in the month of March, according to a Central Bank of Nigeria data analysed by THE WHISTLER.

The reserves shrank to $39.54bn on March 31, from the $39.86bn recorded by the end of February 2021.

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Between January and March, the reserves have shedded $973.7m from $40.52bn recorded on January 1, 2022 to $39.54bn by the end March 2022.

“The moderate accretion to reserves reflects the duality of Nigeria’s position as an oil exporter and importer of refined petroleum products,” the Central Bank Governor Godwin Emefiele said at the last Monetary Policy Committee meeting held in March 2022.

Although the CBN governor last year said the level of the country’s reserves can sustain trades for months, the bank has continued to battle with scarcity of forex needed to carry out transactions.

Nigerian exporters and importers alike have lamented the impact of rationing which the CBN has resorted to following undue forex pressure.

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The naira has consequently been under severe pressure and the currency has been forced to exchange at N416.25 per dollar on the official window and N578 at the parallel market.

Emefiele had at the France-Nigeria Security and Economic Summit in Paris admitted that “exchange rate continued to experience significant pressure in the various windows. Accordingly, the CBN adjusted the official exchange rate from N306/US$ to N405/US$.”

The adjustment was made along the Investors and Exporters foreign exchange Window which has since then devalued further.

A business analyst and professor of economist at the Ahmadu Bello University Zaria said the “value of every currency has an indirect link to the strength of reserves. The reserves are determined by export capacity. If the reserve is low, it shows Nigeria has not been producing and exporting enough.

“This is also in turn affecting the value of the naira. When you import more, you will be in high demand of foreign currency and the tendency is for the price of the naira to shrink because you will need more forex to fulfil the import obligations.”

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He said the weak currency has contributed immensely to Nigeria’s inflation as importers spend more to bring in goods into the country.

“Nigerian reserves have been drawn to the extent that it is almost exceeding the threshold and has been a concern for most financial analysts because of the implication it has,” he added.

But he said that at $39.5bn, “Nigeria can fund its bills for months. If the reserves are such that it cannot fund the bills, the country is in trouble and Nigeria is almost driving to such a situation.”

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