It has been revealed that the decline in Nigeria’s foreign exchange reserves which dipped to $39.2 billion is threatening the naira.
For two years the naira exchange rate against the dollar and other currencies has been stable.
A member of the Central Bank of Nigeria (CBN)-led Monetary Policy Committee (MPC), Prof. Adeola Adenikinju, who observed the new trend, warned that unless certain conditions are addressed, the national currency will be in trouble.
In a statement to the CBN on the MPC Meeting, Adenikinju, who is Research Professor at the Centre for Econometrics and Allied Research, University of Ibadan, said the fall in foreign reserves and deterioration of current account balances are red signals indicative of difficult time ahead for the naira.
Market data showed that the naira depreciated at the Investors’ & Exporters’ (I&E) windows by 0.49 per cent to close at N363.49/$ from N361.7/$, but the currency was exchanged at N306.95/$ in the official market.
The naira-dollar exchange rate at the I&E window remained stable since April 2017 at N360 – $1. There were also significant convergence in the exchange rate across the various market windows until current volatility set in.
Gross external reserves declined further by 1.16 per cent to $39.24 billion from $39.7 billion at the beginning of the month. Although the reserves had peaked at $45 billion in July 2019, the current decline have led to a reduction in Nigeria’s import cover from 9.88 months to 9.77 months.
Adenikinju explained that although the
