External reserves lowest in six months, at $42.84bn

The nation’s foreign exchange reserves have declined further, falling to the lowest level since March 12, latest data obtained from the Central Bank of Nigeria on Sunday showed.

The external reserves, which rose to a high of $45.18bn June 10, 2019 from $43.17bn January 1, dropped to $42.84bn as at September 12.

The reserves dipped by $763m in 13 days from $43.60bn on August 30.

One of the core mandates of the CBN is to manage the forex reserves, which are assets held on reserve in foreign currencies.

The central bank receives foreign exchange inflows from crude oil sales and other sources of revenue on behalf of the Federal Government.

“Such proceeds are purchased by the bank and the naira equivalent credited to the federation account. These proceeds are shared each month, in accordance with the constitution and the existing revenue sharing formula.

The monetised foreign exchange, thus, belongs to the CBN. It is from this portion of the reserves that the bank conducts its monetary policy and defends the value of the naira,” the CBN said on its website.

Bismark Rewane, the managing director/chief executive officer, Financial Derivatives Company Limited, predicted in a recent presentation that the external reserves would fall to $42bn this month owing to lower oil price.

“The price of oil in August was below $60 per barrel and the external reserves are sliding towards $43bn. The last thing Nigeria needs at this time is any threat to its hard-earned reserves, especially with the P&ID judgement of $9.6bn against the country,” he said earlier in the month.

According to him, the possibility of Nigeria facing a fiscal shock is high, if oil prices slide below $55 per barrel.