CBN provides explanations as Nigeria's forex reserve drops consecutively for 30 days, now at a seven-month low

CBN provides explanations as Nigeria's forex reserve drops consecutively for 30 days, now at a seven-month low

  • Nigeria's External reserve is currently having one of its worst run despite oil is trading above $100 per barrel
  • CBN data shows the reserve has now dropped to the level it was in October 2021, indicating a 7-month low to date
  • The CBN governor, Godwin Emefiele in the most recent Monetary Policy Committee meeting provided an explanation

Nigeria’s external reserve has dropped to a seven-month low as exporters, politicians and others tightened their grip on dollars.

According to data obtained from the CBN website, the reserves currently stand at $38.54 billion as of May 27, 2022. The last time it was at this level was in October 2021.

The decline in Nigeria's reserves would make it more difficult for the CBN to defend the Naira against further depreciation due to dollar scarcity and increased demand for dollars.

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CBN, Nigeria's forex reserve
chart movement of foreign reserves depletion Credit: CBN
Source: Facebook

CBN provides explanation

Providing an explanation after May 2022, Monetary Policy Committee Meeting, Godwin Emefiele, the CBN Governor, blamed the high cost of fuel importation for Nigeria's declining reserves.

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His words:

“Nigeria’s dwindling foreign reserves can be attributed to the weak accretion to the reserves from exports and the high cost of importation of refined petroleum products.”

Nigerian Banks reacts

In reaction to the dwindling reserves and dollar supply, Nigerian banks are now asking their customers to apply for forex 30 days ahead.

One of the banks, Access Bank in an email to customers seen by Legit.ng explained that a 30-day window to complete requests for school fees, accommodation, and upkeep.

It stated that:

“All requests are reviewed to ensure that they meet regulatory requirements. In addition, due to limited forex availability provided by the Central Bank of Nigeria, we require a 30-day period to fulfil requests for school fees, upkeep and rent payment.

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“However, for PTA/BTA, we request that you submit your application 14 days before your proposed travel date to allow disbursement within the timeline.”

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

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