Nigeria’s foreign exchange reserves, a key safeguard against economic shocks, have shrunk by $3.8 billion, equivalent to approximately 10.2 percent in recent months, dwindling to $33.31 billion.
This information was gleaned from data available on the Central Bank of Nigeria’s (CBN) website, spanning from January to October 25, 2023.
This marks the lowest level for the country’s reserves since July 2021 when it hit a previous low of $33.09 billion, according to an analysis by the Nigerian Tribune.
Experts from Cowry Assets Management Limited attribute this decline to Nigeria’s inability to capitalize on the global oil market windfall due to geopolitical tensions in Eastern Europe since February 2022.
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Additionally, a scarcity of dollars within the central bank’s vault to support the naira has placed significant strain on the country’s economy.
This, however, has led to the apex bank relying on the reserves for its continued defense of the local currency in the foreign exchange market.
“Thus, we can say that the steady decline in gross official reserves, coupled with FX liquidity constraints has resulted in a weakening of investor confidence and a general loss of appetite by the offshore community.
“Notwithstanding, we can point fingers to a number of factors behind this decline. One is the rising cost of imports, driven by factors such as the war in Ukraine and supply chain disruptions,” the experts stated.