Fitch Warns Of Dip In F/Reserves To $20bn, CBN Douses Tension

By Fola James

Fitch Ratings, a global credit ratings agency, has warned that Nigeria’s foreign reserves would dip to an all-time low of $23.3 billion by the end of the year.

The projection came on the crest of fear that the national currency (the Naira) could lose more value to reflect the size of the nation’s foreign exchange, which currently stands at $37 billion.

The foreign exchange, by the beginning of 2020 stood at over $42 billion but has dipped due to the crash in the crude oil price, which greatly narrowed earnings from the country major export.

The price of the commodity in the international market now hovers around $25 and $30.

Fitch therefore, warns huge loss from oil revenue could draw down the nation’s foreign reserves by at least $10 billion by the end of 2020.

The agency said on Tuesday “We expect outflows to materialise later in the year, which, alongside a significant current-account deficit and continued CBN resistance to overhauling the exchange-rate framework, will drive a fall in international reserves from $38.6bn at end-2019 to $23.3bn at end-2020.”

The credit agency further warned that the level of foreign direct investment, FDI will dip even as the country battle to contain the economic impact of the corona virus pandemic, adding that  “the current account, which had been in surplus for much of the last 20 years, to record a deficit equivalent to 3.8 per cent of GDP in 2020 and 2.5 per cent in 2021.”

Meanwhile, the Central Bank Governor, Godwin Emefiele at the week end, doused fears that soon the current level of Nigeria’s FS will not be able to support her imports.

The apex bank governor insists that the forex is “robust to support the economy,” reiterating CBN’s “ willingness to provide foreign exchange to companies that required such for raw materials and machinery that could not be obtained in Nigeria.”
Emefiele appealed to the private sector to “support efforts aimed at growing the Nigerian economy and returning it to its glory days,” as the country makes more efforts to put the COVID 19 pandemic behind her and put the economy in full throttle.