Nigeria’s foreign exchange reserves were by 8.46 percent year-on-year to $35.35 billion by December 30, 2020, compared with $38.62 billion at the same period last year, the Central Bank of Nigeria (CBN) latest data has shown.
The foreign exchange reserves of Africa’s biggest economy were also down 8.25 percent year-to-date as the buffer opened the year at $38.53 billion on January 2, 2020.
The country’s foreign reserves have experienced a downturn following a sharp drop in global crude oil prices in the wake of the outbreak of Coronavirus pandemic, which disrupted the global supply chain and cut demand for oil.
Nigeria depends largely on revenue from oil export to fund its annual budget and earns around 90 percent of dollar income from oil exports.
The decline in forex earnings from oil exports and capital flight by offshore portfolio investors have put pressure on available reserves with the CBN resorting to rationing dollar to importers and other endusers as part of measures to conserve forex.
The regulatory bank has devalued the local currency thrice this year in a bid to curb speculations on the available dollar and harmonise the multiple exchange rate regime in the country while also conserving the reserves.
Despite the efforts of the CBN, many businesses continue to groan as a result of lack of access to dollars to import essential raw materials and machinery for production.
The Chief Executive of a drug company told one of our correspondents recently that Nigeria may soon experience shortage of essential goods due to lack of access to dollars by manufacturers to procure raw materials and machinery spare parts for production.
Investigations by the Global Financial Digest revealed that some companies have to resort to borrowing dollars from local units of foreign banks to enable them to stay afloat in the face of dollar shortage.
The naira traded at N470 to the dollar on the parallel market on Thursday, firmer than N475 it traded the previous day as traders attributed the gain to inflows of funds from the Diaspora remittances.
However, the local currency depreciated by 0.13 percent on the Investors’ and Exporters’ (I&E) window on Wednesday as the dollar was quoted at N394.00 as against the last close of N393.50 per dollar previously.