Weak oil prices amid falling global demand plunged Nigeria’s foreign exchange reserves to $35.63 billion, the lowest in two months, the Central Bank of Nigeria’s latest data has shown.

After reaching as high as $45 billion in June 2019, the reserves has been on a downward trajectory since then. Declining to $38 billion earlier this year before plunging to $35.69 billion on October 28 from $35.74 billion on September 30, 2020.

The reserves had picked up slightly after the International Monetary Fund borrowed Nigeria $3.4 billion under the Rapid Financing Instrument to mitigate the negative impact of COVID-19 on the economy.

But persistent spending amid weak foreign revenue generation and low foreign direct investment weighed on the nation’s reserves.

In a recent report, the central bank said the reserves could decline to $29.9 billion by the end of December 2020 given the current global oil prices.

It said, “external reserves are expected to lie between $29.9bn and $34.3bn at end-December 2020 (predicated on current declining oil price between $20 and $40).”

“Sequel to the COVID-19 pandemic, the viability of the external sector in 2020 is expected to deteriorate, given the present worsening current account balance and depletion of external reserves driven, largely, by decelerating export receipts, particularly oil.

“Specifically, the degree of external reserves accumulation is expected to decelerate, as outflows are expected to outweigh inflows.”

Last week, Mr. Bismarck Rewane, the Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, said the Naira exchange rate could hit N475 by the end of December because of the weak oil prices and low demand for the commodity. He went on to predict that foreign reserves could drop to $34 billion, better than the central bank projection for the same month.

“The CBN will maintain its forex rationing stance and intensify efforts to keep the naira stable. External reserves to likely fall towards $34bn in the coming months.”