At an investor meeting in London, Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), told foreign investors that the apex bank would meet all foreign exchange demands so long as the nation’s external reserves are above $30 billion and the international prices of crude oil do not go below $45 per barrel.
Information that Emefiele was in London to woo selected foreign investors was revealed in a first-of-its-kind monthly update by the CBN published Wednesday on its website.
Emefiele also assured that reserves are unlikely to dip below $30 billion “considering various policies of the Federal Government to diversify the economy”, the report read.
Oil prices would need to weaken some 40 percent to create the scenario where the CBN can no longer guarantee exchange rate stability, as Brent crude was priced at $63 per barrel as of November 21.
At the current level of $39 billion, external reserves will have to fall 30 percent.
Emefiele’s meeting with investors came after signs of a growing backlog of foreign exchange demand.
The CBN saw less foreign exchange inflows than outflows in the third quarter of 2019, in what is only the third such occurrence since the fx crisis of 2016 and the first time this year.
Net fx outflow in the third quarter was $3.6 billion, being the difference between inflows of $11.7 billion against outflows of $15.3 billion.
The implication of net fx outflows is that it may invite pressure on the exchange rate which the CBN has protected at all costs for more than two years.
Lower dollar inflows reduce the CBN’s firepower in defending the naira against any depreciation as it eats away at the external reserves.
The CBN’s gross external reserves are already on the decline, after shrinking 12 percent from $45 billion at the start of the year.
Foreign investors have been particularly worried by the trend which surely rekindles bitter memories from 2016 when the fx backlog swelled to as much as $7 billion as investors had their money trapped.
LOLADE AKINMURELE
