Tough times await Nigerian currency, and its economy as for the first time in three months, Nigeria’s external reserve has fallen below the $40 billion threshold.
According to latest data published by CBN on Friday evening, Nigeria’s external reserves level as at Thursday, 3rd February 2022, had fallen to $39.98 billion.
This came about a day after Ripples Nigeria reported that the apex bank withdrew $400 million from the reserve in the month of January 2022.
The reserves had been on a good run since October 2021 after CBN took receipt of IMF SDR $3.5 billion and also successful issuance of $4bn euro bond.
But pressure from the foreigh exchange market, coupled with weak dollar coming in from oil sale, forced CBN to rely on external reserves to defend Naira.
Most notable was the fact that Nigeria’s international trade balance continued to rise as importation exceeded export by a whopping N3 trillion as at Q3, 2021.
With the consistent decline of the reserves and the Nigerian National Petroleum Corporation not showing signs of fixing it’s production challenges, Naira could face devaluation in the coming weeks.
CBN needs the external reserves to intervene at the forex markets and also further minimize the relevance of black market traders. How this can be achieved remains to be seen.