Nigeria’s external reserves now stand at $36.57 billion, having increased sharply from $33.42 billion as of April 29, 2020. This development has given the Central Bank of Nigeria the fire power to defend the Naira exchange rate as promised by Central Bank Governor Mr. Godwin Emefiele.
The rise in the nation’s reserve can be attributed to rising oil prices and facility granted to the country by International Monetary Fund to fight COVID-19. The reserve position will further improve when other expected facilities comes in. The recent jump in crude oil prices to about $40 have helped Nigeria’s foreign reserve to rise at a steady pace.
According to the latest data obtained from the Central Bank of Nigeria (CBN) website, Nigeria’s foreign exchange reserves now stand at $36.57 billion, having increased from $33.42 billion as of April 29, 2020. This shows a gain of $3.15 billion dollars. This feat recorded above (rising FX reserves) has given the CBN Governor, Godwin Emefiele, more ammunition to defend the naira.
Weeks ago, the Naira had traded as high as N475 to $1. But, it sold at N446 to $ during the week. It will be recalled that the CBN Governor had warned currency speculators and hoarders to stop manipulating Nigeria’s exchange rates. He also said that Nigerians should stop patronising parallel market operators. According to him, the rates they are buying the dollar from that segment of the market are unrealistic.
The CBN recently re-started the weekly dollar sales of $100 million for small businesses and individuals who are in genuine need of foreign exchange. The forward market 12-month naira forwards improved to N454.50 per dollar on Wednesday, from a high of N522.56 on April 20. Also, the currency traded at N388 to the dollar in the spot market. The local currency has also appreciated from N460 to a dollar to N445 to a dollar in the parallel market in less than 2 weeks, not long after the Central Bank of Nigeria started selling dollars to small and medium enterprises and foreign students.
The planned resumption of dollar sales to Bureau De Change (BDCs) is expected to further help ease the pressure in the market. Meanwhile, the Brent traded over $40 per barrel, and the Nigerian Bonny light crude also traded almost $38 per barrel, both selling at the highest price in almost 3 months. The oil prices are very important for Nigeria, as about 90% of its foreign exchange earnings is from crude oil sales. The foreign exchange market had been under intense pressure due to the low oil prices and the economic crisis caused by the coronavirus outbreak globally. Nigeria’s external reserve had been badly hit, as it lost over $11 billion within a space of 10 months, crashing from its peak of $45.17 in June 11, 2019 to $33.42 in April 29, 2020. The oil price increase has caused a rebound in the external reserve to over $36 billion as of June 1, and reduced the pressure on the Naira with improved liquidity of the foreign exchange market.