Nigeria’s external reserves sink further

• now below $40bn, lowest in 22 months

Latest data from the Central Bank of Nigeria (CBN) has revealed that the nation’s foreign exchange reserves have slumped below the $40 billion mark, indicating their lowest level in 22 months.

The nation’s external reserves which have been on a downward movement of recent, dipped by over $5 billion in the last five months.

The reserves which rose to a high of $45.18 billion on June 10, 2019 fell to $44.9 billion on July 31 and $43.61 billion on August 30 while he biggest monthly decline was recorded in September as the reserves shed $1.76 billion to close at $41.85 billion in the period.

The reserves dropped to $40.46 billion as of October 31 and as at November 25, 2019, they stood at $39.88 billion, the lowest level since January 18, 2018, according to the CBN data.

It is worth nothing that one of the core mandates of the CBN is to manage the reserves, which are assets held on reserve in foreign currencies. The apex bank receives foreign exchange inflows from crude oil sales and other sources of revenue on behalf of the Federal Government.

“Such proceeds are purchased by the bank and the naira equivalent credited to the Federation account. These proceeds are shared each month, in accordance with the constitution and the existing revenue sharing formula.

“The monetised foreign exchange thus belongs to the CBN. It is from this portion of the reserves that the bank conducts its monetary policy and defends the value of the naira,” the CBN stated on its website.

The International Monetary Fund noted in October that Nigeria’s current account turned into a deficit in the first half of 2019 after three years of surpluses, spurred by one-off increases in imports.

It said gross international reserves had fallen to below $42 billion at the end of August 2019, mainly reflecting a decline in foreign holdings of short-term securities and equity.