The external reserves of Nigeria fell by $337 million in the first two weeks of August. This is in line with a downward trend that began in the middle of last month.
According to data from the Central Bank of Nigeria, external reserves fell to $38.882 billion on Thursday, August 11, 2022 from $39.219 billion at the end of July 2022.
This means that external reserves have lost $563 millions since July 18, when this negative trend began.
The country’s external reserves were on a steady upward trend for 40 days before July 18th. They grew by $976 million to $39.445 billion from $38.421 billion on June 6th. This was due to an increase in crude oil prices which accounts for more than 80% the country’s foreign exchange revenues.
Financial Derivatives Company Limited (FDC) analysts attribute the decrease in reserves since July 18th to the increasing dollar sales of the Central Bank of Nigeria (CBN), to stabilize the exchange rate.
They predicted further declines in foreign reserves but argued that an increased dollar supply by the apex bank would result in naira appreciation on both the official market and the illicit one.
They stated in the FDC Bi-Monthly Economic Bulletin:
“The depletion of reserves was mostly due to the CBN’s provision of foreign exchange to stabilize the currency.”
“The CBN is anticipated to intensify its attempts to stabilize the currency by delivering foreign exchange to the I & E (Investors and Exporters) window, which is expected to continue its downward trend.”
“High oil prices may impact the country’s external reserves less due to the country’s low oil production levels.”
“Continual depletion of external reserves is likely to dissuade the CBN from supplying foreign exchange in the forex market.” This might exacerbate currency depreciation when demand exceeds supply.”