The Central Bank of Nigeria (CBN) has explained why the country’s foreign reserves dropped to about $44bn and asks Nigerians not to panic as the reserves are healthy enough to hedge any pressure against the naira.
The CBN also said the current foreign reserve can finance between 17 and 20 months imports and enough to defend the naira.
The CBN Director, Corporate Communications, Mr. Issac Okorafor, gave the assurance, yesterday, in Abuja at the ongoing Trade Fair during the CBN Special Day.
Nigeria’s external reserves dropped from about $47.37bn as of April 5, 2018 to about $44bn now shaving off over $3bn in five months.
But Mr. Okorafor was optimistic of a rebound with the rising oil prices tipped to even reach $100 per barrel in the near term.
“At $44bn, we still have between 17 and 20 months importation cover. Meanwhile, the international standard is three months,” he said, adding that oil prices are rising so we are very comfortable about recovery. We have the reserve to defend the value of naira.”
He noted that the reserves level was a moving figure as it goes up and comes down. “As we speak, it is a little about $44bn. You will recall that there was a time we survived at even about $23.6bn.”
He further explained: “The reason why it has gone down steadily is because there is a global squeeze on emerging markets. The US central bank has been raising interest rates and international capital goes to where it finds better returns. So those who had come into our economy to take advantage of our good rates are now getting better returns in the US.
“It’s not only Nigeria; it is happening to South Africa, Iran, Egypt, Argentina, Brazil, Turkey and even China. China has lost about over 1.3 percent of its currency. But here in Nigeria, our currency has gained in the last one year.
“We’ve not lost the value of our currency because we built enough buffers in our reserves to cushion effects in situations like this and we have been able to defend our naira. That also accounts for why our foreign reserves is dropping.
“Another reason our reserves dropped is because investors who brought in dollars when they want to leave, we give them their money in line with our capital importation policy. This is why the reserves have also dropped.”
SOURCE: DAILY TRUST