BY EMEKA EJERE
Amid continued depletion of Nigeria’s foreign reserves, the naira is facing an intense pressure that has left it struggling both at the official and unofficial windows of the foreign exchange market.
Nigeria’s external reserves fell by $100 million in three days, from June 26 to June 28, as the figures continued to witness historic depletion. At the moment, the nation’s foreign reserve is among the poorest in the comity of oil-producing and leading African economies, including South Africa, Egypt and Morocco.
Data from the Central Bank of Nigeria (CBN), showed that the gross reserves have fallen to approximately $33.4 billion on June 28 against the $33.5 billion balance as of June 25, 2021.
The liquid form also fell from an excess of $33.3 billion to $33.2 billion within the three days, leaving the country with a shortfall of over $100 billion. The external reserve fell to a fourteen-month low as of Monday (June 28). The figures have been on a reducing balance since last May 28 after appreciating briefly between May 26 and 28 before pulling back.
Month-on-month, the gross and liquid reserves have lost an average of $0.8 billion. While the gross figure, which comprises invested and liquid proportions, depreciated by $0.85 billion, the liquid form lost $0.77 billion.
Experts had that Nigeria faced a tough challenge financing its huge import as the foreign reserve holdings continue to tumble. The falling reserves, they said, could leave the country’s battled economic outlook worse off since the confidence of foreign investors is partly influenced by the size of the reserve.
Investment expert and economist, David Adonri, warned that Nigeria, like every other import-dependent country, needed a supportive foreign reserve to meet its needs. According to him, the declining reserve at a time when oil prices are rising raises a question on the tidiness of the national economy management.
“The value of the naira and foreign investors’ confidence in the economy is tied to the level of foreign reserve available. As it depletes, foreign investors’ confidence in the economy is being eroded”, Adonri said.
“The main source of forex inflow is earnings from crude oil export held by CBN in foreign reserves supported by diaspora remittances and export proceeds.
“As the major provider of forex in the economy, CBN can determine the value of the naira and influence imports. With the depletion of the foreign reserve, that power is diminished considerably.”
The falling reserve is compounded by a historic foreign exchange crisis that has worsened in recent months, with the naira becoming increasingly more volatile since the CBN adopted the Nigerian Autonomous Foreign Exchange (NAFE) window for official transactions.
According to a report by the Guardian, some foreign online platforms are trading naira at N508/$ even as the local currency faces renewed pressure at the parallel market where it has sold at N502/$ since the beginning of last week.
However, data posted on AbokiFX.com, a website that collates parallel market rates in Lagos showed that the naira closed at N503.00 per $1 at the black market window on Friday, the same rate it has been trading since June 30, last month.
Meanwhile, the naira fell against the U.S. dollar at the official market on Friday after it gained slightly at the previous session. According to data posted on the FMDQ Security Exchange where forex is officially traded, the naira closed at N411.25 at the Nafex window. This represents a N0.55 or 0.13 per cent devaluation from the N410.70 the rate it traded in the previous session on Thursday.
The disparity between the parallel market and the Over-the- Counter rates staged at N91.75, translating to a margin of 18.24 per cent as of the close of business on Friday.