- Nigeria’s Foreign reserves have dropped by $1.65 billion in the last six months
- Data from CBN shows that Nigeria’s Nigeria’s gross forex reserves stood at $34.62 billion, dropping to $32.97 billion as of December 1, 2023.
- The development follows CBN’s devaluation of the naira on June 14, 2023
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Nigeria’s foreign external reserves have dropped by $1.65 billion to N$32 billion since the Central Bank of Nigeria (CBN) began to unify Nigeria’s Forex rates.
The apex bank directed commercial banks to remove rate caps on the naira at the official Investors and Exporters (I&E) window to ensure the free float of the naira against the other international currencies.
CBN collapses Forex windows to unify exchange rates
The CBN circular said all segments are collapsed into the I&E window, stating that applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed via commercial banks.
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The naira has declined since the announcement, and the foreign reserves have also dropped.
Punch reports that as of June 15, 2023, Nigeria’s gross forex reserves stood at $34.62 billion, dropping to $32.97 billion as of December 1, 2023.
The drop in reserves has been blamed for the depreciation of the naira and the lack of capacity for Nigeria to earn Forex from oil and non-oil exports.
In July 2023, CBN said that the accumulation of external reserves remained weak as forex demand pressures mounted.
At the bank’s Monetary Policy Committee (MPC) meeting, a committee member, Obadan Mike, noted that amid unrelenting demands, the real problem of the Forex market remains inadequate supply, showing low economy productivity, insufficient earnings, and limited foreign capital inflows.
CBN pays 31 banks to clear backlogs
The development comes as the CBN said it had made tranche payments to 31 banks for FX backlogs, which analysts say was responsible for the decline of the naira, according to a report by Legit.ng
The bank also said it has set up foreign exchange mechanisms to address FX issues.
The governor of the Central Bank of Nigeria (CBN), Yemi Cardoso, disclosed this on Friday, November 24, 2023, at the bankers' dinner in Lagos.
The apex bank governor said there had been an improved Forex market liquidity in recent weeks as the market responded positively to part payments made to about 31 banks to clear the backlogs of forward obligations.
"No More N927/$": New CBN action Inspires naira's recovery in the official market
Legit.ng reported that the Naira appreciated against the US dollar on Monday, December 4, 2023, closing at N837.77 per dollar in the official market. '
The positive rebound of the Naira aligns with the expectations of experts, who hoped that the Central Bank of Nigeria's (CBN) recent moves to clear Forex backlogs would boost investors' confidence.
The Nigerian currency appreciated by 10.67% to close at N837.77 against the US greenback, according to data from the Nigeria Autonomous Foreign Exchange Market (NAFEM).