Foreign Reserves Decline By 11.8% in 5 Months

• Foreign Reserves Decline By 11.8% in 5 Months

The Nigerian foreign exchange reserves declined further in November despite government efforts to maintain healthy foreign reserves.

The nation’s foreign reserves declined by $5.31 billion or 11.75 percent from $45.18 billion recorded on June 10, 2019 to $39.87 billion by November 25, 2019, the Central Bank of Nigeria data stated on its website.

The reserves have been on the decline since capital importation slumped in the first half of the year as foreign investors continue to hold off on investment amid economic uncertainty.

Capital importation dipped by 7.8 percent in the third quarter to $5.37 billion, according to the National Bureau of Statistics (NBS). This coupled with the increase in capital flight and largely unstable global oil prices weighed on foreign reserves in the second half of the year.

The CBN led Monetary Policy Committee left the interest rate unchanged at 13.5 percent, saying it is important to maintain the ongoing progress by the central bank.

The committee said to sustain a 65 percent loan-to-deposit ratio policy and enhance local manufacturing, especially now that the land borders are closed, it is important to maintain a moderately loose monetary policy.

While this may help deepen local production, it would further hurt capital importation as foreign investors may abandon Nigerian assets for less riskier assets with better interest rates.

Overall, the weak oil price remains an issue as Nigeria’s economic growth is largely oil-dependent as seen in the GDP report. The economy expanded by 2.28 percent in the third quarter because the oil sector grew by over 6 percent while the largest sector, non-oil, expanded by 1.83 percent.