Nigeria’s external reserves drop by $1.9 billion in three months

A net balance of $37.11 billion was left in Nigeria’s gross external reserves at the end of December. Since September 2021, when reserves decreased to $36.7 billion, this balance has been at its lowest level.

According to a cursory examination of the apex bank’s external reserves statistics, the balance was only $37.07 billion on December 2nd, 2022, and it may drop as low as $36 billion in the next few days.

Since September 2022, the external reserve has decreased by approximately $1.9 billion over a period of three months. The export profits from the selling of oil and gas to other nations are a major source of funding for Nigeria’s foreign reserves.

But increasing instances of crude oil theft have hurt Nigeria’s ability to export and, consequently, its foreign exchange reserves.

Nigeria’s foreign exchange reserves are also financed by Eurobond sales or multilateral loans in foreign currencies from organizations like the World Bank or IMF. Nigeria, though, hasn’t purchased any Eurobonds in more than a year, forcing the central bank to rely primarily on crude oil sales.

According to RNN, the central bank’s recent defense of the naira is the most likely cause of the decline in external reserves. The central bank’s capacity to hold onto some of the gains made versus the dollar on the black market is threatened by a decline in external reserves.

READ MORE: Motives for CBN’s most recent cash withdrawal policy

The chance that the central bank may consider devaluing the naira to stop the withdrawals rises as external reserves fall. Given that it continues to explore other strategies for suppressing demand, the central bank is not expected to devalue before the elections. New naira notes were just introduced as a measure.

According to the NNPC, Nigeria’s daily crude oil production output increased to over 1.59 million barrels per day. Increased revenue for the nation could result from this, which might increase foreign reserves.
Nigeria’s currency liquidity management is mainly reliant on dollars generated by crude oil exports.

The introduction of new naira notes was recently announced by the central bank of Nigeria, along with a set launch date of December 15, 2022.

Additionally, it recently disclosed that it would lower the over-the-counter cash withdrawal limits for both individuals and corporations to merely N100,000 and N500,000, respectively. These and other programs attempt to increase the nation’s foreign exchange reserves as it fights against currency depreciation and soaring inflation.