Nigeria's External Reserves Lose $915 Million After Naira Float, Begins Week on Negative Note
- Nigeria's foreign reserves lost close to $1 billion due to currency float and Forex market liberalisation
- On June 14, 2023, the country's reserves stood at $34.66 billion, but the currency float was announced, and the amount declined to N33.74 billion by August 24, 2023
- The local currency crashed after the naira float began trading above N700 per dollar ever since
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Nigeria's foreign reserves declined by $915 million after Nigeria's apex bank, the Central Bank of Nigeria (CBN), floated the naira and liberalised the foreign exchange market.
According to data from CBN on Sunday, August 27, 2023, the reserves, which stood at $34.66 billion as of June 14, 2023, when the naira was floated, dropped to $33.74 billion on August 24, 2023.
Source: Getty Images
From N471 to N778: Naira crash follows CBN's actions
The local currency's value closed at N471.67 per dollar at the Investors and Exporters (I&E) window on June 13, 2023, a day before the apex bank announced the Forex liberalisation.
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Due to the float, the naira depreciated by over N700 per dollar at the I&E window. The naira has traded above N700 per dollar in the official since the float.
The local currency traded at N915 per dollar at the unofficial market as dealers and buyers scrambled for dollars.
Findings from Bureau de Change operators indicate that the pounds sterling traded at N1,160 and N1,180 as of Friday, August 25, 2023.
The naira began trading on Friday, August 25, 2023, at N773.29 per dollar and hit a high of N799.9 per dollar before closing at N778.42 per dollar.
CBN vows tough against BDCs and currency manipulators
The Acting CBN Governor, Folashodun Shonubi, said during the last Monetary Policy Committee (MPC) meeting that the accumulation of the external reserves remains vulnerable while Forex demand pressure continues.
Punch reports that the acting CBN governor vowed to save the naira from further decline and to clamp down on illegal dollar supply into Nigeria.
The development follows the $3 billion loan by the Nigerian National Petroleum Company Limited (NNPC) from AfreximBank as a temporary buffer to improve the dollar supply in Nigeria.
BDC operators to work with CBN to strengthen naira
Aminu Gwadebe, the Chairman of the Bureau De Change Operators of Nigeria, said that the CBN would be going tough on illegal operators in their efforts to stabilise the naira.
The external reserves are CBN's firepower against the falling value of the naira and provide a buffer for portfolio investors.
Gwadebe said CBN told them that by August 31, 2023, any breaches on the allowable margin of -2.5% and +2.5% on the average weighted rate on the I&E closing date rendition of returns and payment of penalties will lead to the operator's license revocation.
The naira float has caused a surge in inflation in Nigeria, hitting a 17-year high of 24.08% for July 2023.
Data from the National Bureau of Statistics revealed that food inflation surged the most during the period under review.
Naira in Trouble?: JP Morgan reveals Nigeria’s forex reserve is at $3bn, far lower than CBN’s figure
Legit.ng earlier reported that Global financial service firm JP Morgan has revealed that Nigeria’s net forex reserve has declined to around $3.7 billion.
The financial institution disclosed this in its latest report on Nigeria titled “Nigeria: Reform pause rather than fatigue."
The FX reserves figure quoted by JP Morgan is much lower than the Central Bank of Nigeria's reported figures of about $33.82 billion published on its website.
Source: Legit.ng
