Wahala dey! Nigeria’s FX reserves down 19.5% to $35.8bn

by Tunji Andrews

Indications of the official website of the Central Bank of Nigeria, has indicated that the country’s external reserves fell to $35.8bn on December 9, down 19.5%, down from the $44.5bn it was at same period in 2013.

Off the back of the CBN’s intense defence of the Naira, which has seen the CBN spend about $29bn, YTD defending the Naira. An analysis of the drop shows that the fall rate picked up in the last few months, dropping almost $200,000 daily, as the CBN stepped up its defence of the naira currency from the foreign exchange reserves.

The reserves, which stood at $37.7bn a month ago, had fallen by $2bn within one month: it tumbled from $39.1bn on October 21 to $37.1bn on November 21.

The naira has fallen 12.1 percent against the dollar this year, including a one-off, 8 percent devaluation by the central bank last month, as global oil prices plunged.

On November 25, however, the central bank devalued the local currency in a bid to reduce pressure on the national currency.

CBN governor, Mr. Godwin Emefiele, last Friday, said that the apex bank was forced to devalue the national currency in the face of the depleting reserves.

Emefiele said, “The CBN has spent a substantial amount of its reserves in shoring up the naira and in contrast, inflow of forex into the banks or the country has been less than anticipated in view of dwindling oil prices.

“The CBN took the decision that it would be sub-optimal to continue to heavily deplete the country’s reserves in defending the naira. This decision was appropriate because neither the central bank nor the federal government is in control of the major factors causing the depreciation of the nation’s currency.”

Arguing further, he said, “In fact the Russian central bank has abandoned its defense of the currency and allowed the depreciation of the currency, but only after it was said to have spent over $90 billion in defending the currency over a couple of months.”

Brent crude oil slipped below $66 a barrel on Wednesday, just above a five-year low, on mounting signs of oversupply and lacklustre demand as global economic growth falters.

The price of the North Sea oil benchmark has fallen more than 40 percent since June as new supplies of high-quality crude from North America have fed a glut of fuel in many parts of the world.

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