Nigeria’s external reserves, crucial for maintaining currency stability, have experienced a significant decline of 7.21% over the past year. As of May 22, 2024, the reserves dropped to $32.763 billion, down from $35.31 billion recorded on April 20, 2023. This downward trend underscores the challenges facing the nation’s economy, particularly in the realm of foreign exchange management.
The pressure on external reserves stems from various factors, including heightened demand for foreign currency to facilitate goods imports and service payments. Additionally, limited investment inflows due to weakened confidence and restricted inflows from crude oil sales, attributed in part to oil theft, have contributed to the strain on reserves.
The impact of declining reserves is palpable in the foreign exchange market, where the Nigerian naira has witnessed further depreciation. On Thursday, the naira weakened further against the dollar in the official foreign exchange market. Data from the FMDQ Securities Exchange Limited revealed that the dollar was quoted at N1,484.75, marking a 10.45% decrease in value compared to the previous day’s rate of N1,329.65.
Moreover, the dwindling dollar supply by willing sellers and buyers exacerbated the situation, declining by 30.05% to $235.41 million on Thursday from $336.54 million recorded on the preceding day. The intraday high and low also reflected the naira’s depreciation, closing weaker at N1,520 per dollar and N1,100, respectively.
Despite efforts and interventions by the Central Bank of Nigeria (CBN), including various policies aimed at stabilizing the currency, the naira continues to depreciate in the foreign exchange market. Even at the parallel market, also known as the black market, the naira remained unchanged at N1,480 on Thursday, signaling ongoing challenges in currency management.
As Nigeria grapples with these economic realities, stakeholders remain vigilant, monitoring developments and exploring strategies to address the underlying issues contributing to the pressure on external reserves and the depreciation of the naira.
