By Dipo Olowookere
The foreign reserves of Nigeria shrank in one week by $224 million or 0.58 per cent to $38.571 billion from $38.795 billion, data obtained by Business Post from the Central Bank of Nigeria (CBN) revealed.
Analysis indicated that the forex coffers of the nation, which prides itself as the largest economy in Africa, closed at $38.571 billion on Thursday, May 26, 2022, compared with the $38.795 billion it finished on Thursday, May 19, 2022.
On the penultimate Friday, Nigeria’s FX reserves shrank to $38.751 billion. Last Monday, it increased to $38.652 billion but depleted to 38.625 billion the next day and a day after, it decreased to $38.598 billion.
The depreciation in the forex buffers came despite an increase in the price of crude oil in the global oil market in the week.
Nigeria has not been able to take advantage of the Russia-Ukraine war to boost its FX earnings from crude oil sales and gas supply amid a shortage of supply in Europe as the European Union (EU) is planning to reject Russian energy as a form of punishment for invading Ukraine.
It was observed that the shrink in the reserves happened amid the injection of $210 million into the FX market to support the Naira and boost forex liquidity.
The sum of $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), $55 million was given to Small and Medium Scale Enterprises, while another $55 million was supplied to FX traders to meet the needs of users for BTA, medical, school fees and others.
The supply of FX to the market by the apex bank had a positive effect on the local currency last week as it gained N2 or 0.48 per cent against the United States Dollar at the Investors and Exporters (I&E) segment of the market to close at N418.33/$1 compared with the previous week’s value of N420.33/$1.
However, at the Peer-to-Peer (P2P) segment, the Naira depreciated against the greenback in the week by N1 or 0.16 per cent to N617/$1 from the previous week’s N616/$1 and at the black market, it remained flat at N600/$1 amid mopping up of dollars by politicians for the primaries ahead of the 2023 general elections.
This weekend, the ruling All Progressives Congress (APC) will conduct its presidential primary and it is expected that the Naira will remain under pressure because of the demand for forex to woo delegates for the presidential ticket.
As analysts at Cowry Asset put it, “we expect some level of pressure on the Naira against USD due to anticipated pressure on foreign exchange amid electioneering activity coupled with weak petrodollar earnings.”
Adedapo Adesanya