Ngozi Amuche
Central Bank of Nigeria, on Friday, said the country’s foreign exchange reserves grew by 0.56 percent to $35.80 billion in September 16, their highest since July 29.
Similarly, the nation’s forex buffer rose from $35.60 billion on August 17 and stood at $35.87 billion on July 29, before it started declining due to pressure on the domestic foreign exchange markets.
The forex reserves have declined by 7.05 percent year-to-date as the country experienced a sharp drop in foreign exchange inflow due to the impact of the coronavirus pandemic on the global demand chain and disruption in demand for its crude oil.
However, the forex exchange buffer had started the year at $38.53 billion but took a dive downward in the wake of the outbreak of the coronavirus pandemic, which disrupted the global supply chain and caused demand for crude oil, Nigeria’s mainstay, to fall sharply.
Recall that the apex bank had devalued the local currency twice this year in its bid to conserve forex reserves and curb speculations of the available dollars.
The regulatory bank has also been rationing dollars on the domestic forex market as demand from both offshore investors trying to exit the country surged to a huge backlog of $7 billion, market observers said.
Also, in spite of the elongation of the list of items ban from accessing foreign exchange from the official sources, many companies and individuals seeking dollar for transactions have not been able to obtain it because of the dollar shortage.
The dollar shortage is a reminisce of the one in 2016 that eventually led the country into a recession as it confronts another possibility of a recession in the third quarter of the year.
The difference between the management of the foreign exchange in 2016 and now is that unlike four years ago, the CBN has devalued the naira by as much as 20 percent since March and working toward achieving convergence in all the market segments.
Dollar scarcity could engender low productivity and impact negatively on the ability of the private sector to grow as the country still largely depends on importation for its manufacturing sector.