Amid currency crisis and fluctuation in oil prices. The country’s gross foreign reserves dipped by nearly $600 million in December alone. This raises fresh concern about the short to medium-term stability of the foreign exchange market.
The figure closed at $40.59 billion on December 22 as against $41.19 billion, bringing the net gain within the period to -$598.93 million. The last reported figure in the month, as at press time—$40.59 billion, was the lowest since October 18, 2021. Then, the gross reserves figure was $40.39 billion.
It remained in an upswing thereafter. Reaching a recent all-time high of $41.82 billion on October 29 before it started a gradual but consistent decline.
Despite the recent depletion, the reserves are closing on a positive note this year. The gross reserves opened the year at $35.65 billion while the liquid component (the part available for use) was $35.31 billion. That puts the year-to-date (YTD) gross reserves gain at $4.94 billion or 14 per cent.
In 2020, the gross component opened at $38.536 billion and closed at $35.37 billion, losing about 8.2 per cent. The loss reflected the crisis in the international oil market and other macroeconomic challenges associated with the COVID-19 crisis.
The rally in the international oil market and the country’s $3.35-billion share from the International Monetary Fund (IMF)’s Special Drawing Rights allocation of $650 billion helped Nigeria to gain traction.
At the France-Nigeria Security and Economic Summit, recently, the CBN Governor, Godwin Emefiele, said the reserves would surpass $42 billion by the middle of next year.
Falling reserves put pressure on foreign exchange and raise concerns about the country’s ability to fulfill foreign currency financial obligations. Nigeria has had an extensive currency crisis this year as supply could not match rising dollar demands.
The monetary authority also stopped the funding of Bureau de Change (BDCs) and handed over the retail disbursement of FX to deposit money banks (DMBs). Despite the incentives, the road to stability has remained bumpy. The exchange rate at the black market yesterday was N560/$ while the official market rate closed at N515/$.
– The Guardian