Nigeria’s External Reserve fall by $40.1 billion

The Central Bank of Nigeria (CBN) has withdrawn $400 million from the Nigerian external reserves, resulting to a fall in foreign reserve figures by $40.1 billion.

The decline in external reserves are strongly correlated to Exporters segment of the foreign exchange window and forex interventions of the Central bank of Nigeria.

To save pressure on the reserves, the CBN last year discontinued its $20,000 weekly Forex sales to 5,500 Bureaux De Change operators, costing it an average of $5.72bn yearly.

This move increased the volume of dollars traded (turnover) at the official specialized market.

In January participants at the I&E window dollar exchange rose sharply by 152 per cent, Year-on-Year (YoY), to $2.16 billion in January 2022 from $906.44 million in January 2021.

In the first week of January a total of $337.65 million was traded, increasing by 91 percent to $645.44 million in the second week before dropping by 9.2 per cent to $585.86 million in the third week.

The downward trend continued in the fourth week as turnover fell by 15 per cent to $495 million. Turnover stood at $95.07 million on the last day of the fifth week.

The increased pressure at the official market, dwindling forex reserves and lack of enough oil revenue could mean a big challenge ahead for Nigeria, a feeling which was clearly captured in CardinalStone Research outlook for 2022.

The report states that based on the latest data as of second quarter of 2021 (Q2’21), the Central Bank of Nigeria (CBN) estimated the fair value of Naira at N462 per dollar, which implies a 12.3 per cent overvaluation versus the I&E rate.

Words from report” To curb inflationary pressures and avoid a worsened currency position, we think that the CBN is unlikely to adjust the Naira to N462 per dollar. Hence, we project a Naira devaluation of N440 per dollar in 2022,” .

WSTC Securities Limited in their 2022 outlook is expecting the exchange rate to trade between the band of N415 – N430 in the I&E Foreign exchange window in 2022.