LAGOS, Nigeria (VOICE OF NAIJA)-According to data released by the Central Bank of Nigeria, Nigeria’s foreign exchange reserves have decreased by $1.8 billion over the span of 10 weeks.
As of May 29, 2024, the country’s FX reserves were reported at $32.69 billion, a decrease from $34.44 billion recorded as of March 18.
This decline marks a reduction from the $36.1 billion recorded in May 2023.
The reserves have shown a consistent decline in recent months, totaling a decrease of $3.4 billion since February 2024.
Experts attribute this decline in FX reserves to several factors, including debt repayment, a notable decrease in oil exports, reduced foreign investment, and an increase in imports.
Debt repayment figures reported by the apex bank indicate a decrease from $560 million in January 2024 to $283.29 million in February and further to $276.16 million in March 2024. Analysts suggest that the apex bank likely utilized the external reserves to service foreign debts.
In May, the naira weakened despite an increase in dollar supply totaling $4.60 billion in the official foreign exchange market.
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The FX market closed the month with the naira depreciating by 5.60 percent, with the dollar quoted at N1,485.99, compared to N1,402.67 at the beginning of the month, according to data from the FMDQ Securities Exchange Limited.
By the end of May 2024, the dollar was trading at N1,470, down from N1,380 at the start of the month.
The currency’s performance this week highlights a notable challenge in maintaining its value amid varying forex turnover and investor sentiment.
According to The PUNCH, CBN Governor Olayemi Cardoso outlined the specific reasons behind the substantial drop in reserves.
He explained, “What we have seen concerning shift in our reserves is the shift that you would find in any country where for example, debts are due and certain payments need to be made and they’re done because that is also part of keeping your credibility intact and other times money comes in and you know it takes the reserves up again and watches in the next couple of days, there will be an improvement.
Nigeria’s economy depends significantly on oil exports, which contribute over 90 percent of its foreign exchange earnings.
Financial experts have observed that the decline in FX reserves has resulted in the weakening of the naira, Nigeria’s currency, which has been under pressure against the US dollar.
Since the beginning of 2024, the naira has depreciated by over 100 percent against the dollar, ranking it among the worst-performing currencies in Africa.
“The CBN has been intervening in the foreign exchange market to stabilise the naira and boost investor confidence.
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“However, the decline in FX reserves has raised concerns about the country’s ability to meet its foreign debt obligations and finance its imports.
Nigeria’s foreign exchange reserves serve as a crucial indicator of the country’s economic health, and their decline has raised concerns among economic experts.
The government faces increasing pressure to diversify the economy and lessen its dependence on oil exports.
“The decline in FX reserves is a clear indication that Nigeria’s economic challenges are far from over,” he added.
He urged that “the government must take urgent steps to address the decline in oil exports, boost foreign investment, and diversify the economy to prevent further decline in the country’s FX reserves.
On Monday, the naira started trading positively in the official market, appreciating to N1,476 per dollar.
This marks a 0.61 percent increase from the N1,485.99 recorded on Friday.
According to the daily market summary from the FMDQ, the intraday high closed at N1,500, down from N1,550 per dollar on Friday, while the intraday low weakened to N1,250 per dollar from N1,174.88 per dollar quoted at NAFEM on Friday.
The dollar supply by willing buyers and sellers amounted to $121.87 million.