External reserves drop by $1bn in five weeks

The Central Bank of Nigeria, in its latest statistics, has said that Nigeria’s external reserves have been depleted by $1billion in the last five weeks.
This follows the CBN’s almost daily intervention at the interbank/official foreign exchange market in recent weeks, as chronic dollar shortage continues to weigh on the economy.
In its efforts to defend the naira and prevent it from falling further at the official interbank market, the apex bank has been selling dollars at the interbank market more frequently.
The naira had fallen to an all-time low of 365.25 to the dollar at the interbank market on August 18 before making a gradual recovery. The local currency closed at 310.64 against the greenback.
At the parallel market, the naira, which had been under persistent pressure, closed at 424 to the dollar on Friday.
The external reserves fell by 2.86 per cent to $25.45billion on August 29, 2016, up from the $26.2billion it recorded at the end of July. Year-on-year, the reserves have fallen by 18.9 per cent.
The reserves had fallen by 0.4 per cent at the end of July, down from the $26.34billion recorded on June 29.
The CBN had on June 20 lifted its 16-month-old currency controls and auctioned about $4billion on the spot and futures market to clear a backlog of dollar demand, to help boost interbank market trading.
The global plunge in oil prices has caused the reserves to be depleting very fast. The development had forced the CBN to introduce foreign exchange controls, which were abandoned in June.
The CBN’s Monetary Policy Committee announced plans to adopt a flexible exchange rate policy after the external reserves fell to $26.56billion on May 23. The external reserves have so far lost over $2billion 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.
The nation’s external reserves reduced by $6.7billion within a period of 21 months, the Minister of Budget and National Planning, Senator Udo Udoma, said on March 23.
However, the foreign exchange reserves increased by $595million to hit a one-month high of $26.196billion, according to the CBN data.
It had stood at $25.6billion as of August 24, down from $26.21billion on July 28, the CBN data showed the reserves declined from $26billion on August 4, 2016 to $25.97billion on August 5 as the CBN stepped up dollar sales to boost liquidity at the interbank market and support the ailing naira.
The central bank has been selling dollars regularly at the interbank market to prop up the naira since it floated it on June 20.