Nigeria’s gross external reserves have closed the month of December with a net balance of $37.11 billion. This is the lowest balance since September 2021 when reserves fell to$36.7 billion.
A quick check on the external reserves data from the apex bank, reveal the balance as of December 2nd, 2022 is just $37.07 billion and could fall into the $36 billion range in the next few days.
The external reserve has now fallen by about $1.9 billion in 3 months since September 2022.
Nigeria’s external reserves are largely funded from export proceeds from the sale of oil and gas to other countries.
However, rising cases of crude oil theft have dented a blow on Nigeria’s export potential and thereafter the country’s external reserves.
Nigeria’s external reserves are also funded from foreign currency loans such as multilateral loans from the likes of the World Bank or IMF or from the sale of Eurobonds.
However, Nigeria has not tapped the Eurobond market in over a year meaning the central bank has had to rely mainly on crude oil sales.
Analysts opined the drop in external reserves is likely due to the central bank’s defense of the naira in recent weeks.
A drop in external reserves poses a challenge to the ability of the central bank to maintain some of the gains recorded against the dollar on the black market.
The lower the external reserves the higher the likelihood of the central bank considering a devaluation of the naira to stem the outflows.
The central bank is unlikely to devalue before the elections as it continues to pursue other means of stifling demand. A recent measure was the introduction of new naira notes.
Nigeria’s daily crude oil production output rose above 1.59 million barrels per day according to the NNPC.
This could mean increased revenue for the country and might translate to higher external reserves.
Nigeria relies heavily on crude oil driven dollar proceeds for its forex liquidity management.
The central bank of Nigeria recently announced the introduction of new naira notes and a fixed date of December 15, 2022, to launch the new notes.
It also recently announced it was reducing withdrawal limits over the counter cash to just N100,000 and N500,000 for individuals and corporates respectively.
These initiatives among others are aimed at shoring up the country’s forex reserves as it battles currency depreciation and galloping inflation.
