CBN to Devote Available FX to Strategic Importation as Foreign Reserves Declines

• CBN to Devote Available FX to Strategic Importation as Foreign Reserves Declines

The Central Bank of Nigeria on Sunday said it would devote available foreign exchange to only strategic importation or service obligations.

Nigeria’s foreign reserves plunged from $38 billion in January 2020 to $34.1 billion in May following the fall in oil prices and global demand for the commodity.

The COVID-19 pandemic and lockdowns by Nigeria’s top oil trading partners like China, US and India stalled crude oil sales and weighed on the nation’s foreign revenue needed to service the largely import-dependent economy.

In March, the apex bank devalued the Nigerian Naira to protect the falling foreign reserves due to the surged in capital outflow and almost zero foreign revenue. Experts attributed the move to dwindling foreign reserves and diminishing CBN’s fx intervention power.

Since then, Naira foreign exchange rate has surged with fx traders at the non-deliverable fx futures already trading the Naira at N570 to a US dollar in a five-year futures contract.

This was because forex traders doubted the apex bank could meet the sudden surge in demand for the US dollar by foreign investors looking to move their funds abroad as the world prepares for post-COVID-19 crisis.

The CBN, however, announced on Sunday that it has put in place policies to ensure orderly exit for those that might be interested in doing so.

In a Twitter post put out by the apex bank, the CBN said: “Investors interested in repatriating their funds from the country are guaranteed to get their money, notwithstanding the drop in the revenue from crude oil.”

“CBN has put in place policies to ensure an orderly exit for those that might be interested in doing so.

“Foreign Exchange available would be devoted to strategic importation or service obligations that are priority.”

The announcement was to ease panic demand for the US dollar by foreign investors that are worried the local currency exchange rate could rise even further.