The nation’s foreign exchange reserves have slumped below the $40bn mark, hitting their lowest level in 22 months, latest report from the Central Bank of Nigeria has shown. The external reserves, which have been on a downward trajectory in recent times, dipped by over $5bn in the last five months. The reserves rose to a high of $45.18bn on June 10, 2019 but fell to $44.9bn on July 31 and $43.61bn on August 30.
The biggest monthly decline was recorded in September as the reserves shed $1.76bn to close at $41.85bn. They further dropped to $40.46bn as of October 31. As of November 25, 2019, the reserves stood at $39.88bn, the lowest level since January 18, 2018, according to the CBN data. One of the core mandates of the CBN is to manage the reserves, which are assets held on reserve in foreign currencies.
The Central 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 Apex Bank has recently moved to intensify restrictions on forex access for imports that were imposed in 2015 in a bid to conserve the nation’s foreign reserves. The CBN said in July that it had restricted the sale of forex for the importation of milk from the Nigerian forex market. In August, President Muhammadu Buhari disclosed that he had directed the CBN to stop providing forex for importation of food into the country.
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 $42bn at the end of August 2019, mainly reflecting a decline in foreign holdings of short-term securities and equity.