Nigeria’s Foreign Reserves Plummet by $915 Million Amid Naira Float

Nigeria’s foreign reserves declined by $915 million following the Central Bank of Nigeria’s (CBN) decision to officially adopt a floating exchange rate system and liberalize the foreign exchange market.

According to data released by the CBN on Sunday, the country’s reserves, which stood at $34.66 billion as of June 14, 2023, when the naira was floated, have now decreased to $33.74 billion as of August 24, 2023.

Just a day before the CBN announced the shift to a floating exchange rate, the naira’s value had been pegged at N471.67 per US dollar at the Investor & Exporter forex window.

Subsequently, the local currency experienced a sharp depreciation, with its exchange rate surpassing 700 naira to a US dollar at the same forex window.

Since then, the naira has consistently traded at over N700 per dollar. In fact, on Saturday, at the parallel market, the exchange rate reached as high as N900 to a US dollar for buying and N915 for selling.

Bureau de Change operators reported similar trends, with the British Pound Sterling being exchanged at N1160 for buying and N1180 for selling.

At the I&E window, trading for the naira began on Friday at 773.29 naira per US dollar, reaching a peak of N799.9 before closing at N778.42 per US dollar.

During the most recent Monetary Policy Committee meeting, Mr. Folashodun Shonubi, the acting Governor of the Central Bank, expressed concerns about weak external reserves accretion and continued pressure on foreign exchange demand.

He also emphasized the Central Bank’s commitment to stabilize the naira and crackdown on illegal Bureau de Change operations.

These developments occurred after the Nigerian National Petroleum Corporation announced its plan to secure a $3 billion loan from the Africa Import and Export Bank as a temporary measure to boost dollar supply in the country.

Aminu Gwadabe, the President of the Association of Bureau De Change Operators of Nigeria, underscored the Central Bank’s determination to address the currency’s instability.

“At a sensitisation engagement between the CBN and a few of our compliance officers across the zones, the apex bank reiterated that by August 31, 2023, any breaches on the allowable margin of -2.5 per cent and +2.5  per cent on the average weighted rate of I&E closing rate, rendition of returns and payment of penalties, if any, will lead to revocation of the operating licence of the operator,” he said.