External reserves drop to $26.33billion

The nation’s external reserves fell marginally to $26.33bn on June 29, down 0.30 per cent from a month ago, the Central Bank of Nigeria data showed on Thursday.

The foreign exchange reserves stood at $26.42bn on May 27, down by 9.2 per cent year-to-year.

The reserves had stood on the $26.4bn mark between May 24 and 27, after dropping to $26.5bn from $26.6bn same month.

Between May 31 and June 7, the external reserves stood at the $26.3bn mark, before rising back to the $26.4bn mark on June 8, a level it maintained till June 24. On June 27, it fell back to $26.36bn.

The CBN had two weeks ago lifted its 16-month-old currency controls and auctioned about $4bn in the spot and futures market to clear a backlog of dollar demand, to help boost interbank market trading.

The central bank has sold $7m at 283 naira to the dollar on the interbank currency market on Thursday, one trader at a major commercial bank told Reuters.

Traders said the local units of ExxonMobil, Chevron, Eni and Addax sold a combined $37.2 million through commercial banks for import of petroleum product to the country.

The interbank market traded a total of $60m volumes by 1256 GMT, with the naira quoted at 283 to the dollar.

The external reserves had fallen month-on-month by 2.65 per cent from $27.15bn to $26.42bn on May 27.

The reserves have dropped by over 10 per cent from last year when they were at $29.7bn.

The global plunge in oil prices has caused the reserves to be depleting very fast. The development has forced the CBN to introduce foreign exchange controls, which were abandoned some weeks ago.

The CBN’s Monetary Policy Committee announced plans to adopt a flexible exchange rate policy after the external reserves fell to $26.56bn on May 23.

The external reserves have lost over $2bn dollar this year.

The nation recorded a balance of payments deficit of 1.4 per cent in its Gross Domestic Product at the end of 2015, owing largely to its first current account deficit (three per cent of the GDP) in over a decade.

Analysts said the CBN’s decision not to devalue the naira had led to the sharp drop in the external reserves.

But they lauded the MPC’s plan to adopt a flexible exchange rate policy, noting that the move would help to boost forex inflow into the country.

The nation’s external reserves had reduced by $6.7bn within a period of 21 months, the Minister of Budget and National Planning, Senator Udo Udoma, said on March 23.