Since the Central Bank of Nigeria attempted to stabilise the nation’s foreign exchange rates, the country’s reserves have decreased by $1.6 billion to $32.97 billion due to ongoing fluctuations in foreign currencies.
Recall that on June 14, the apex bank announced new foreign exchange regulations that mandated Deposit Money Banks to lift the naira’s rate cap at the official Foreign Exchange Market’s Investors’ and Exporters’ Window in order to permit the naira to freely float against the US dollar and other international currencies.
Foreign exchange reserves and the value of the naira have decreased since then. The gross foreign exchange reserves of the nation were $34.62 billion as of June 15.
CBN Will Spend $3bn Loan To Stabilise Economy – NEC
In the meantime, as of December 1, 2023, the foreign exchange reserves decreased to $32.97 billion, according to new data from the CBN.
The foreign exchange problem in Nigeria has been partially attributed to insufficient foreign exchange reserves.
For example, the Economist Intelligence Unit revealed in a recent Africa Outlook report that Nigeria lacks sufficient foreign exchange reserves to support its exchange rate unification programme.
It said, “In Nigeria, an unsupportive monetary policy implies that the naira will remain under pressure, while the central bank lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, which will keep foreign investors unnerved. High inflation and a continued spread with the parallel market will destabilise the exchange rate regime and result in periodic devaluations.”
External Reserves Decreased In January By $64 Million
In a same vein, Lead City University Don Prof. Godwin Oyedokun blamed low foreign reserves, a double forex window, weak economic fundamentals, and rising external indebtedness for Nigeria’s currency problem.
Additionally, JP Morgan calculated that after larger-than-expected currency swaps and borrowing against existing reserves, Nigeria’s net foreign exchange holdings were $3.7 billion. There will likely be pressure on the FX market due to these low net foreign exchange reserves, even though the CBN may source foreign exchange at commercial and semi-commercial rates.
But just two weeks ago, at the Chartered Institute of Bankers of Nigeria (CIBN) 50th anniversary, Dr. Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), stated that the ongoing fluctuations in exchange rates were impeding the growth of businesses and pledged to be open and equitable to all as the bank carried out its function.
LATEST: What Femi Falana Said About Buhari’s Fresh Order On Grazing Reserves
“I’m confident and optimistic that by taking appropriate corrective actions and strategic steps, we can restore macroeconomic stability and address fundamental flaws,” he stated.
Follow us on Facebook
Post Disclaimer
The opinions, beliefs and viewpoints expressed by the author and forum participants on this website do not necessarily reflect the opinions, beliefs and viewpoints of Anaedo Online or official policies of the Anaedo Online.