CBN predicts Nigeria’s foreign reserves may fall to $34bn year-end

The Central Bank of Nigeria (CBN) has predicted that the nation’s foreign currency reserves which opened the year in January at $38.100 billion may close the year between $29.9 billion and $34 billion as nation’s economy is negatively impacted by the coronavirus pandemic which has taken toil on oil, its main source of foreign exchange earner.

The apex bank regulator revealed in its Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2020/2021, issued on Sunday.

According to CBN, “Specifically, the degree of external reserves accumulation is expected to decelerate, as outflows are expected to outweigh inflows.

“As a result, external reserves are expected to lie between $29.9 billion and $34.3 billion at end-December 2020 (predicated on current declining oil price between $20 and $40),” the regulator said in.

Nigeria’s foreign reserves had been fast depleting from January till April, when it touched a year-to-date low of $33.440 billion in April before a $3.4 billion credit from the International Monetary Fund came along that helped it bottom out, after falling without cease for at least eight consecutive months.

It climbed marginally by $58.464 million or 0.16% to $35.724 billion by 29th September, having risen from $35.665 billion a month before.

“This development, in addition to exchange market pressures, emanating from speculative activities in the BDC and I & E segments of foreign exchange market, is expected to exert pressure on the naira exchange rate.

“In addition, increased risk aversion behaviour by investors may negatively impact on capital inflow, as they flee to safe-haven assets,” the CBN report added.

It is on record that the nation’s reserves hit a six-year peak at the beginning of January 2019 at $43.075 billion, a milestone yet to be bettered since that point.