Nigeria’s Foreign Reserves Rise by $1.22bn in Eleven Days

• Nigeria’s Foreign Reserves Rise by $1.22bn in Eleven Days

The nation’s foreign reserves rose by $1.22 billion in eleven days, according to the report released by the Central Bank of Nigeria.

Despite weak revenue generation and low oil prices due to the global pandemic, the foreign reserves rose to $34.65 billion from $33.42 billion posted in April.

The Nigerian foreign reserves stood at $38 billion in January before plunging with low oil prices to $34.65 billion and subsequently forcing the Central Bank of Nigeria to technically devalued the Nigerian Naira to protect the nation’s foreign reserves.

Africa’s largest economy and exporter of crude oil has been battered by not just low oil prices but the inability to sell its crude oil as nations like Saudi Arabia, Iraq, Russia, etc continues to offer huge discounts to sustain their market shares, especially in the Asian region.

With revenue declining and almost zero oil sales, the Federal Government approached the International Monetary Policy (IMF) for emergency funding assistance to cushion the negative impact of COVID-19 on Africa’s largest economy.

IMF had predicted that Nigeria will contract by as much as 3.4 percent in 2020 alone, while the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has said without a well-structured stimulus package Nigeria will plunge into an economic recession this year.

Foreign exchange traders at the non-deliverable future market have started pricing in projected dollar illiquidity as they doubt the apex bank would be able to support the local currency and sustain its intervention at various fx segments.

The Nigerian Naira was traded at N570 to a US dollar in a five-year fx non-deliverable futures contract last week. Another indication of where the local currency likely to trade in the future, especially with the Central bank finally giving up on stage-managing it.