- Nigeria’s External Reserves Drop to Seven-Month Low
The Nigerian foreign exchange reserves have declined to a seven-month low, dropping $1.102 billion in the last two weeks, according to the Central Bank of Nigeria.
The reserves, which was $44.30 billion on September 28, declined from $44.02 billion on October 2 to $43 billion on October 15.
In the last five months, the reserves have dropped $4.86 billion from the $47.865 billion recorded on May 10.
The International Monetary Fund warned the Federal Government to be cautious about the use of its foreign exchange reserves, saying global oil prices could moderate at any time depending on when US-Iran reached an agreement and global trade war abate.
The IMF, in its Regional Economic Outlook, published last week, said tighter global financial conditions due to monetary policy normalisation in advanced economies or a change in investors’ sentiment could constrain financing and growth for most sub-Saharan African countries.
“Higher US interest rates and a stronger dollar also heighten risks, as observed historically in emerging and developing economies. In particular, the probability of a large reversal in foreign flows in sub-Saharan Africa is significantly higher the US interest rates go up,” the fund stated.
However, the Director, Corporate Communications, CBN, Mr Isaac Okorafor, explained that higher yields in the United States is the reason for falling foreign reserves as investors that previously jumped on emerging economies for interest rates are now going back for better opportunities.
“The drop in our forex reserves is basically as a result of the capital flow reversals arising from rising interest rates in the United States. You will recall that the Federal Reserve has been raising rates and has even given guidance that this would continue in the near term,” he added.