Nigeria’s Foreign Reserves Decline By $182.17m In 7 Days

This week, Nigeria’s Foreign Exchange (FX) reserves remained under pressure, declining by $182.17 million when compared to what it was a week ago (WTD) to $35.71 billion as of March 24, 2020.

This was due to offshore outflows which intensified as inflows remain benign.

At the tail end of previius week, the Central Bank of Nigeria (CBN) announced a “re-alignment” of the currency, moving the official and IEW rate to N366.00/$ and N380/$ from N307/$ and N366/$, respectively. Bringing the naira closer to where analysts said is its fair value (N416.42/$ – Cordros’’ estimate base on PPP valuation). Consequently, the naira weakened by 2.5 per cent w/w to N381.50/$ in the I&E Window and by 6.3 per cent to N400.00/$ in the parallel market.

“While we acknowledge that the currency still remains under pressure, we believe the CBN’s FX rate alignment and convergence is a laudable move, which should ease pressures on the balance of payment and curtail speculative attacks on the naira. “Notwithstanding, the size of the recent adjustment might not be substantial enough to buy the CBN enough time before a full-blown devaluation,” analysts at Proshare said.

Recently, the CBN, in a note issued to Bureau De Change operators (BDCs) in the country, suspended the sales of foreign currency for two weeks.

This follows the request made by the Association of Bureau De Change Operators of Nigeria (ABCON) for the CBN to grant them a two-week holiday as a measure to control the spread of the Coronavirus outbreak which is fast spreading in the country.

However, this does not affect dollar transactions in the Investors & Exporters (I&E) window. Thus, portfolio investors, as well as businesses that still require FX for foreign transactions settlement, can access the I&E window. Several businesses currently operate minimal activities as major commercial hubs maintain restrictions in a bid to control the spread of COVID-19.