Nigeria’s external reserves recorded a decline of $2.3bn from $38.59bn to $36.22bn within a two-month period, covering January 1 and March 5 this year.
An analysis of figures obtained from the Central Bank of Nigeria on Friday indicated that this represented a decline of 5.9 percent.
Foreign exchange reserves are assets held on reserve by the CBN in foreign currencies. They are used to back liabilities and influence monetary policy, which comprise foreign banknotes, deposits, bonds, treasury bills, and other foreign government securities.
These assets serve many purposes but are most significantly held to ensure that a government or its agency has backup funds if their national currency rapidly devalues.
According to the International Monetary Fund, these reserves may be used for direct financing of international payments imbalances or for indirect regulation of the magnitude of such imbalances through intervention in foreign exchange markets in order to affect the exchange rate of the country’s currency.
In recent times, the nation’s external reserves had come under pressure due to the drop in oil receipts and the intervention of the CBN in the foreign exchange market.
Data obtained from the CBN showed that the country’s external reserves dropped by $590m in January this year from $38.59bn to $38bn.
The rate of decline widened in February as the reserves dipped by $1.71bn from the $38bn to $36.29bn.
Experts said the outbreak of the coronavirus, which had led to global economic slowdown; fall in the price of crude oil and less inflow of dollars into Nigeria had put a lot of pressure on the reserves in recent times.
They said the associated public health concerns of the coronavirus had led to factory closures in China, a substantial drop in imports, widespread travel restrictions around the world and cancellation of many conferences, sporting events, business travels, and foreign exchange orders.
The drop in crude oil price has raised speculations among Nigerians in general; a development that has put serious pressure on the foreign exchange market, thus making the naira exchange between N405 and N420 to a dollar in the Bureau De Change segment of the market.
The President, Abuja Chamber of Commerce and Industry, Adetokunbo Kayode, said the attention currently being given to crude oil should be reduced while efforts should be focused on developing the crude oil value chain.
He said, “Our GDP will continue to go up if we place less emphasis on oil. Why did we go into recession? It was because the price of crude oil was going down.
“It’s not that we are not productive as a country but we need to take our eyes away from crude oil. We need to emphasize opportunities, open new doors.”
But the Director, Corporate Communications Department, CBN, Mr. Isaac Okorafor, said, “The size of Nigeria’s foreign exchange reserves remains robust and comfortable, given the current realities of Nigeria’s genuine and legitimate foreign exchange demand.
“As such, the CBN remains able and willing to meet all genuine demand for foreign exchange for legitimate transactions. And for the avoidance of doubt, the CBN is also working with the fiscal authorities to properly and accurately respond to the immediate and expected impact of the coronavirus and ensure a sound and stable financial system conducive for job creation and inclusive growth.”