Nigeria’s foreign reserves drop by $974.97m in June
Nigeria’s foreign reserves dropped by $974.97million in June despite the Federal Government’s move to unify the foreign exchange market.
This is according to the Central Bank of Nigeria (CBN) in its foreign exchange movement data.
Westernpost gathered that Nigeria’s foreign reserves closed June at $34.12 billion from $35.09 billion it closed in May.
Foreign reserves in six months of 2023 depreciated by $2.96 billion or 7.99 per cent from $37.08 billion it opened despite a steady increase in global oil prices.
Official forex reserves status data report obtained from the CBN indicated that forex reserves had depleted from $37.211 billion by January 16, 2023, to $34.35 billion at the weekend, its lowest since September 3, 2021.
Nigeria’s foreign reserves, which closed in 2022 at about $37.08 billion, peaked at $37.211 billion on January 16, 2023. It has since been on the decline.
Finance experts stated that while the foreign reserves might remain under pressure in the meantime due to the usual policy time lag required for transitional effects, there were credible indications that the recent policy mix by the new government could stop the drift and start the much-needed recovery.
They said a mix of increased oil receipts, foreign investments, remittances and reduction in foreign exchange (forex) management could boost foreign reserves in the medium to long term.
President, Association of Capital Market Academics and Professor of Capital Market Studies, Uche Uwaleke, said the outlook in the immediate period is “grim”, given that the only way the exchange rate can be stabilized at the current level is by substantial intervention by the CBN, which can only happen at the expense of the external reserves.
“So, expect depletion in external reserves in the near term because the expected inflows of foreign direct investments will not happen overnight,” Uwaleke said.
Analysts at Cordros Capital Group said they expected the re-introduction of the “willing buyer, willing seller” model at the Investors & Exporters (I & E) Window to influence the exchange rate direction.
“Nonetheless, while the CBN’s abolishment of its multiple forex windows is positive in boosting foreign investors’ confidence, we think they will adopt a wait-and-see approach, for now, looking for signals on the CBN’s plans to start clearing the forex backlogs and boosting forex supply to support the market in the near term,” Cordros Capital stated.
The naira depreciated by 13.9 per cent to N770.17 per dollar at the I & E Window (IEW).
Total turnover however dropped by 31 per cent to $513.88 million, with trades consummated within the N446.32 and N815.00 per dollar band.
Analysts at Cordros Capital noted that given the government’s efforts at curbing oil theft and pipeline vandalism, crude oil production will maintain its slow increases in the near term.
Analysts estimated Nigeria’s crude oil production to settle at 1.53mb/d in 2023, indicating a higher oil production level relative to the 2022 actual production volume of 1.37mb/d.
They, however, cautioned that aggregate production is unlikely to reach its pre-pandemic high of 2.10mb/d without investment in new production capacity, which may continue to limit the government’s oil revenue performance in the short term.
