CBN Continues Withdrawal from Nigeria's Foreign Reserves as it Falls Below $40 Billion, the Lowest In 4 Months
- Nigeria's foreign reserves are starting the new year precisely where they left off, with a 5.04 percent decline
- To fulfil FX needs, the Central Bank of Nigeria has been withdrawing from the reserves to the tune of almost $1 billion in the last four months
- Nigeria's external reserves once stood at $41.8 billion, and analysts expected the reserves to rise, but this has not happened
The Central Bank of Nigeria has continued its withdrawal from Nigeria's external reserves and has now in the last four months(October 2021 to January 2022) withdrawn over $2.10 billion which is about $17.2 million daily.
The withdrawal has seen the reserves drop below $40 billion for the first time in over three months, according to data from CBN website.
The reserves, as of October 2021, stood at $41.83 billion, the highest level in years but the following months have seen it drop to $39.82 billion on February 2, 2022.
Source: Facebook
The Punch reports that the reserves had been on a good run since October 2021 after CBN took receipt of IMF SDR $3.5 billion and also successful issuance of $4bn euro bond.
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But pressure from the foreign exchange market, coupled with the weak dollar coming in from oil sale has forced CBN to rely on external reserves to meet investors' and importers' demand for dollars.
What are Foreign Exchange Reserves and why is it important?
Foreign exchange reserves are assets denominated in other currencies (I.E dollars). These reserves are utilized to back up liabilities as well as to influence monetary policy.
Foreign currencies, deposits, bonds, treasury bills, and other foreign government assets are among them.
These assets are retained for a variety of reasons, the most important of which is to ensure that a government or its agency has backup cash if its national currency quickly devalues.
Foreign exchange reserves are also called international or external reserves.
Nigeria external reserves compared to other African countries
Legit.ng had, in an earlier report, ranked South Africa $57.5 billion foreign reserves as of October 2021 as the highest in Africa using data from Tradingeconomics.
This is followed by Algeria's foreign reserves of $55 billion as of March 2020.
Namibia came in third with an impressive $46.01 billion reserves as of the end of September 2021.
Egypt comes next with $40.8 billion foreign reserves as of October 2021 higher than Nigeria $39.82 billion.
Morocco comes in the sixth position with foreign reserves of 35.03 billion as of the end of September 2021.
Kenya followed behind in the seventh position with $14.50 billion foreign reserves as of August 2021.
Other countries include:
- Ghana $10.73 billion
- Angola $9.59 billion
- Tunisia $7.85 billion
- Mauritius $7.66 billion
- Congo $5.81 billion
CBN head criticises Emefiele's decision to ban BDC operators from selling forex
Meanwhile, Obadiah Mailafia, a former deputy governor of the Central Bank of Nigeria (CBN), has criticised the decision of the apex bank to stop providing foreign exchange to bureau de change operators.
Mailafia said the decision could weaken the value of the naira against the dollar and other foreign currencies, as there might be a scarcity of forex.
With his experience of the banking system in Nigeria, Mailafia said the banks might hoard forex for themselves and sell at a high cost to buyers whenever the lenders want.
Source: Legit.ng
