CBN Faces New Headache to Keep Dollar at N1,000 As Nigeria’s Foreign Reserves Fall to 7-Year Low

• Nigeria's foreign reserves have dropped to one of their lowest levels in recent years following recent reforms embarked on by the CBN
• The latest data from the CBN shows that Nigeria's reserves are now at a 7-year low, with no increase recorded since the second week of March
• The foreign reserves are the Central Bank of Nigeria's primary instrument to defend the naira value in the foreign exchange market

Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.

Nigeria's foreign reserves, which give the Central Bank of Nigeria (CBN) the firepower to defend the naira, have depleted to the lowest level in seven years.

According to the latest data obtained from CBN's website, Nigeria's foreign reserves stand at $32.61 billion as of Friday, April 12, 2024.

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This is the lowest level Nigeria's foreign reserve has touched since September 29, 2017, when it was $32.49 billion.

CBN policies to defend naira

Since assuming office, the Yemi Cardoso-led CBN has taken several steps to help the naira recover its lost value in the foreign exchange markets.

One of the decisions is resuming dollar sales to Bureau de Change (BDC) operators.

The CBN sells $10,000 to each BDC at a rate lower than the official exchange rate to control the dollar pricing in the unofficial market.

Similarly, the apex bank consistently participates in the official market to ensure price stability.

This seems to have worked as the naira has appreciated from N1,500 a dollar to exchange at N1,000 in the unofficial market and just above 1,000 in the official market. However, this has come at a cost to Nigeria's reserves.

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Bloomberg reports that Nigeria is burning through foreign exchange reserves at a rate not seen in four years.

It remains to be seen how fiercely the CBN's foreign exchange interventions will continue amid depleting reserves and reports of low crude oil sales.

Banks announce new requirement to buy dollars

Earlier, Legit.ng reported that Nigerian banks released a fresh requirement to customers looking to buy foreign currencies.

The new update comes as the naira records a strong performance in both the official and unofficial markets.

There are strong expectations that the currency's value will improve to at least N1,300 in the coming days.

Source: Legit.ng