External reserves maintain steady decline

Nigeria’s external reserves have maintained a steady decline, dropping by 13.82 percent in one year on low inflows.

Data from the Central Bank of Nigeria (CBN) showed that foreign exchange (FX) reserves declined to $33.98 billion as of July 19, 2023 from $39.43 billion recorded in the corresponding period of 2022.

Foreign reserves remained pressured in the first half (H1) of 2023, despite FX reforms, said Yemi Kale, partner & chief economist, KPMG Nigeria, in his presentation at BusinessDay’s CEO forum in Lagos.

According to him, Year to date (July 6), reserves lost 8.2 percent of its value due to high demand for foreign currency and weak inflows.

The removal of the exchange rate peg saw a convergence of official and parallel market rates. However, limited inflow has led to depreciation of the Naira vis a vis major currencies.

Hè said autonomous FX flows are the dominant sources of FX inflows in Nigeria, adding that empirically, a 1% increase in the foreign exchange gap reduces autonomous flows by 0.4 percent.

“External reserves could remain on the decline without substantial multilateral

support/external fundraise, considering FX backlog and Eurobond redemptions,” he said.

The Naira converged at around N756/$, before diverging slightly after, due to existing FX restrictions, Kale said.

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The foreign exchange (FX) pressure continued on Friday as the naira depreciated further by 0.57 on strong demand for dollars at the parallel market.

One dollar traded at the rate of N865 on Friday as against N860 on the previous day at the black market.

The naira depreciation followed strong demand for dollars by individuals and importers who want to travel for summer holidays and business, a trader said.

On Wednesday, naira fell to an all-time low of N860 per dollar at the parallel segment of the FX market, also called the black market.

At the Investors’ and Exporters’ (I&E) forex window, naira appreciated by 3.22 percent as the dollar was quoted at N768.16 on Thursday from N793.70 on Wednesday, data from the FMDQ indicated.

Willing buyers and sellers maintained bids as high as N844 per dollar on Thursday but lower than N853.00 bid on Wednesday. Also the market recorded a lower bid of N700.00 on Thursday, weaker than N699.50 per dollar during the FX market auction.

The daily foreign exchange market turnover declined by 33.22 percent to $58.22 million on Thursday from $87.19 million recorded on Wednesday.

On June 14, 2024 the CBN collapsed all segments of the FX market into I&E window, Nigeria’s official foreign exchange market, and re-introduced the willing buyers and willing sellers.

Consequently, the official exchange rate rose from N463.38/$ to N768.16, the current rate.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.