The Central Bank of Nigeria, on Friday, said the country’s foreign exchange reserves grew by 0.56 per cent to $35.80bn on September 16, 2020, the highest since July 29.
Similarly, the nation’s forex buffer rose from $35.60bn on August 17 to $35.87bn on July 29, before it started declining due to pressure on the domestic forex markets.
The forex reserves have declined by 7.05 per cent year-to-date as the country experienced a sharp drop in forex inflow due to the impact of the Coronavirus Disease on the global demand chain and disruption in demand for its crude oil.
However, the forex buffer had started the year at $38.53bn but went south in the wake of the pandemic, which disrupted the global supply chain and caused demand for crude oil, Nigeria’s mainstay, to fall sharply.
The apex bank had devalued the local currency twice this year in its bid to conserve forex reserves and curb speculations on the available dollars.
The regulator has also been rationing dollars on the domestic forex market, as demand from both offshore investors trying to exit the country surged to a huge backlog of $7bn, market observers said.
Also, despite the elongation of the list of items banned from accessing forex from official sources, many companies and individuals seeking dollar for transactions have not been able to obtain it because of the dollar shortage.
The dollar shortage is a reminisce of the one in 2016 that eventually led Nigeria into a recession. The country may experience another recession in the third quarter of the year.
The difference between the management of forex in 2016 and now is that, unlike four years ago, the CBN has devalued the naira by as much as 20 per cent since March and working towards achieving convergence in all the market segments.
Dollar scarcity could engender low productivities and impact negatively on the ability of the private sector to grow as the country’s manufacturing sector still largely depends on imports.
