Nigeria’s external reserves continued to decline since the middle of last month, dropping $337 million in the first two weeks of August.
External reserves decreased from $39.219 billion at the end of July 2022 to $38.882 billion on Thursday, August 11th, 2022, according to data from the Central Bank of Nigeria.
This means that since the external reserves started their most recent downward trend on July 18, they have lost $563 million.
Before July 18, the external reserves had been on a 40-day upward trajectory, increasing from $38.421 billion on June 6th to $39.445 billion, up $976 million, thanks to the increase in the price of crude oil, which makes up more than 80 percent of total reserves.
However, experts at Financial Derivatives Company Limited, or FDC, blamed the Central Bank of Nigeria’s (CBN) increased dollar sales in an attempt to stabilize the currency rate for the reserves’ deteriorating performance since July 18.
Even while they predicted that external reserves would continue to fall, they insisted that the apex bank’s enhanced dollar supply would cause the value of the naira to rise on both the official and black markets.
In the FDC Bi-Monthly Economic Bulletin, they made the following prediction: “The CBN’s supply of foreign exchange to stabilize the currency was primarily responsible for the depletion of the reserves.”
It is anticipated that the external reserves will keep declining as the CBN steps up its attempts to stabilize the currency by providing foreign money to the I & E (Investors and Exporters) window.
“The country’s external reserves may be less affected by rising oil prices due to the low levels of oil output in the nation.
The CBN is likely to be deterred from providing foreign exchange on the foreign exchange market if the external reserves continue to be depleted. As demand exceeds supply, this might further fuel currency depreciation.
