- Nigeria’s Foreign Exchange Reserves Plunge to 8-Month Low
Falling capital importation and weak business sentiment continued to weigh on Nigerian foreign reserves, according to data from the Central Bank of Nigeria (CBN).
Nigeria’s Foreign Exchange Reserves dropped below $42 billion for the first time in eight (8) months. As contained in the data, the external reserve stood at $41.99 billion as of October, 31, after reaching a record high of $47.865 billion on May, 10.
Mr Isaac Okoroafor, the Director, Corporate Communications of the Central Bank of Nigeria, earlier explained, September, that the higher yields in the United States, have brought about the plunge in the Foreign Exchange Reserves.
The Director, Corporate Communications of the CBN, further reassured, that the reserves will be sufficient for the three-month standard recommendation; being that as at $44 billion, the external reserves were enough for Nigeria’s import bills, for a period up to Seventeen (17) to Twenty (20) months.
“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,” Mr Okoroafor also said.
However, Mr Godwin Emefiele, the Central Bank Governor, at the International Monetary Fund (IMF) annual meeting in Bali, on September, pointed out that Nigeria had the choice of either building foreign reserves or having a stable currency; he remarked that the latter was preferable.
The CBN left interest rates unchanged during the last monetary policy in Abuja to sustain capital importation and curb rising inflation rate.
According to the apex bank, consumer prices are expected to pick up between the final quarter of the year and first quarter of 2019 due to election spending and 2018 budget implementation.
Therefore, it is likely the apex bank will raise interest rates during the final quarter of the year.