Nigeria’s foreign exchange reserves took a turn for worse from October 2015, when foreign exchange earnings hit new lows and the demand from authorised dealers of foreign currencies, together with regular interventions at the Bureau De Change segment left the country with little balance.
Foreign exchange inflow and outflow through the CBN in October 2015, were $2.82 billion and $2.34 billion respectively, which resulted to a balance of $0.48 billion, while the reserves had already fallen to $30.2 billion from more than $37 billion one year earlier.
With the fall in foreign exchange earnings and demand from currency dealers put at $2.19 billion during the period under review, the plans to boost national reserves suffered a renewed setback even till date.
According to the Central Bank of Nigeria (CBN) in its October 2015 Economic Report just released, though a month-on-month comparison of foreign exchange inflow (income) through the CBN rose by 28.2 per cent, while outflow (spending) fell by 21.6 per cent, the developments are not totally healthy for the economy.
The CBN Governor, Godwin Emefiele, said that fall in oil prices has reduced CBN’s monthly foreign exchange earnings from as high as $3.2 billion to the current level, which is as low as $1 billion, while the demand for foreign exchange by domestic importers has risen significantly.
“The net effect of these combined forces unfortunately is the depletion of our foreign exchange reserves. As of June 2014, the stock of Foreign Exchange Reserves stood at about $37.3 billion but has declined to around US$28.0 billion as of today,” he said.
However, the fall in the level of foreign exchange outflow by 21.6 per cent and 55.8 per cent, which is below the levels in September 2015 and the corresponding period (October) 2014 respectively, was due to the decline in CBN’s foreign exchange interventions.
Still, the total foreign exchange inflow into the economy, which include those from CBN and from other sources (autonomous sources), was estimated at $7.03 billion in October 2015 and represented a decline of 8.7 per cent and 50.2 per cent below the levels at the end September 2015, and the corresponding month of 2014, respectively.
The non-oil sector inflow contributed $1.67 billion (23.8 per cent of the total), representing 47.5 per cent increase, above the level in September, but the autonomous inflow, which accounted for 59.9 per cent of the total, declined by 23.4 per cent, below the level in September 2015.
The development may not be unconnected with the planned delisting of Nigerian bonds from the JPMorgan’s Government Bond Index, which also reduced the participation of foreign portfolio investors in the country’s financial market.
On the other hand, at $2.60 billion, aggregate foreign exchange outflow from the economy reduced by 22.5 per cent and 51.8 per cent, below the levels in the preceding month, and the corresponding month of 2014 respectively.
Thus, foreign exchange flows through the economy, resulted in a net inflow of US$4.43 billion in the review month, compared with $8.71 billion a year earlier. The invisible (services) sector accounted for the bulk (37.7 per cent) of total foreign exchange disbursed.
Source: Guardian Newspaper.
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