[EXCLUSIVE] Nigeria’s forex reserves hit 44-month low, lose $14.65bn in three years

Nigeria’s foreign exchange reserves have tumbled to the lowest level in more than three years and eight months, despite the rally in the price of crude oil, the country’s major source of forex earnings.

The forex reserves fell by $14.65 billion in three years from $47.79 billion on July 5, 2018 to $33.14 billion on July 5, 2021, the lowest since Oct. 16, 2017, according to data obtained by Markets Reporters from the Central Bank of Nigeria.

The Financial Derivatives Company Limited noted in a recent report that the fall in the reserves occurred despite higher oil prices, adding that this could be partly attributed to the increase in the CBN’s forex sales to banks.

“We expect the external reserves to decline further towards $33 billion in the near term due to the lingering backlog of unmet forex demand. Falling external reserves reduce the CBN’s ability to support the naira,” analysts at Lagos-based FDC, led by foremost economist Bismarck Rewane, said.

One of the core mandates of the CBN is to manage the forex reserves, which are assets held on reserve in foreign currencies.

The central bank receives forex inflows from crude oil sales and other sources of revenue on behalf of the Federal Government.

“Such proceeds are purchased by the bank and the naira equivalent credited to the federation account. These proceeds are shared each month, in accordance with the Constitution and the existing revenue sharing formula. The monetised foreign exchange, thus, belongs to the CBN. It is from this portion of the reserves that the bank conducts its monetary policy and defends the value of the naira,” the CBN said on its website.