CBN: Forex Reserves Drop Below $37bn, Threaten Importation

By Fola James

Nigeria’s foreign reserves face imminent threat in the face of dwindling oil prices in the international market, the Central Bank of Nigeria, CBN has said.

The reserves have dropped by over $1.6 bn within the first five weeks of the year, from $38.34bn on January 15, 2020 to $36.69bn on February 20, according to latest figures from the bank.

The current level of Reserves can only clear 12 months of import, the CBN must trigger more austerity measures in case the downward trend continues, monetary experts warn, otherwise problem could arise in foreign trade settlements.

But economic experts also insist that any hostile policy measure could at this time harm stability in the already fragile economy.

Over 90 percent of Africa biggest economy’s forex inflow comes from oil sale, whose price has remained unstable in the last few months.

The price of crude oil has hovered between $50 and $60 despite Iran crisis with the United States of America, which has so far defied speculation of possible hike in the prices of the product.

The Godwin Emefiele led apex bank has, however warned that threat posed by dwindling oil revenue could on the long run spike crisis in the economy, despite various belt-tightening measures by CBN.

Apart from the instability in oil prices, forex demand by the nation’s manufacturing sector has also put more pressure on the nation’s dollar reserves.

According to a report by the apex bank, the foreign reserves has been depleted from $40 bn at the begining of the year, and could experience more pressure within the year as the CBN pays more importation bill.

Meanwhile, Emefiele said the apex bank is doing everything on its part to conserve the reserve from shrinking further.

The CBN disclosed that its tighter monetary policy regime has helped the economy aside the attractive yields in the money market.

The bank’s said it’s providing huge support for the agricultural sector to grow apart from implementation of favorable policies for the manufacturing sector, all aimed at improving the productive sector, with potential to ensure increased forex inflows into the nation’s economy.

Emefiele explained that the CBN has been doing all it could to stabilize the naira and maintain the current level of foreign reserves.

He said the CBN under his watch has managed the nation’s monetary policy well enough in the last five years aside from assisting the government to implement its fiscal policies.

He said “In the import and export window, over $60bn worth of transactions have taken place since the inception of the window in April 2017, and our foreign exchange reserves are above $40bn as at October 2019, relative to its low point of $23bn in October 2016.

“We have been able to build our reserves in the midst of lower oil prices, as strong reserves aid the confidence of domestic and external investors. Today, our current stock of external reserves is able to finance 12 months of current import commitments.”