External reserves hit $25.2bn as dollar shortage bites

The nation’s foreign exchange reserves have risen to over three-month high of $25bn, according to data on the website of the Central Bank of Nigeria.

Specifically, the statistics showed that the external reserves rose to $25.2bn on December 19.

The last time the reserves recorded this figure was on September 8 when it had the balance of $25.16bn.

The country’s fast-depleting reserves had recorded $23.89bn low on October 19.

The reserves have dropped by 15.9 per cent from last year when they closed at $29.7bn.

The CBN data showed that the foreign exchange reserves declined to $24.92bn on September 14 from $25.11bn on September 9.

At the end of November, the reserves stood at $24.77bn, up from $23.95bn on October 31.

Currency and economic experts are not sure if the tiny upticks in the external reserves’ level are sustainable amid the falling naira and acute shortage of dollar in the foreign exchange markets.

“We are not certain of the extent this can go. Currently, the FX market is not a free-float one where the interplay of demand and supply determines price and volume. The uptick in the external reserves is not as a result of increase in supply over demand. It happens when there is a slowdown in the allocation of FX,” the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said.

A senior associate in investment banking at Afrinvest, a research and investment firm, Mr. Ayodeji Ebo, said the gradual accretion of the external reserves could only become sustainable if the global oil price maintained its current level and there was also a continuous ramp up in oil production.

The CBN had on June 20 lifted its 16-month-old currency peg and auctioned about $4bn on the spot and futures market to clear a backlog of dollar demand to help boost interbank market trading.

The reserves had fallen from $26bn on August 4, 2016 to $25.97bn on August 5 as the central bank stepped up dollar sales to boost liquidity at the interbank market and support the ailing naira.

The naira, which touched an all-time low of 365.25 per dollar on August 18 at the official market, has consistently closed around 305.5 in recent weeks.