Foreign reserves drop by $141.5m in 7 days – CBN

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Stories by Kayode TokedeThe

Central Bank of Nigeria (CBN) has disclosed that the nation’s Foreign reserves dropped by $141.5 million in 7 days to $47.26 billion as at July 26, 2018 from $47.41 billion in July 19, 2018.

Foreign reserves have dropped month-to-date by $508.41 million from $47.79 billion it opened July 2018 to $47.26 billion, despite the absence of the CBN’s conventional injection into the foreign exchange market.

The foreign reserves have been hovering round $47 billion since April 17, 2018 and reached the peak of about $47.85 billion on May 9, 2018.

The global oil prices also have been hovering around $73 per barrel, stoking hopes in the industry that the market has finally turned a corner following a three-year slump.

The naira buffer has come under heavy pressure, forcing the CBN to woo local businesses importing goods from China to use the yuan instead of the Dollar in its effort to support the naira and boost reserves.

The apex bank explained that the currency swap is aimed at providing adequate local currency liquidity to Nigerian and Chinese industrialists and other businesses thereby reducing the difficulties encountered in the search for third currencies.

The CBN governor, Mr. Godwin Emefiele at the end of the Tuesday’s Monetary Policy Meeting (MPC) said, the committee members were optimistic and expected further increases in the level of foreign reserves in the near term, citing the favourable crude oil prices.

“The Committee, therefore, advised the Bank to sustain its current efforts to maintain investor confidence and ensure accretion to external reserves,” he said in a communiqué.

Meanwhile, supportive of the decline in the foreign reserves, data from FMDQ shows inflow into the Investors & Exporters Foreign Exchange (I & EFX) window, so far this month (as at July 13), has dropped 51.23per cent to $1.17 billion, compared to similar period in the previous month.

The Naira weakened by 0.12per cent to N361.60 in the I&E FX window, while it remained flat at N360 in the parallel market.

Total turnover in theI& E FX rose by 28.25per cent to $803.14 million, with 99.48per cent of trades consummated within the N360-369/Dollar band.

In the foreign exchange forwards market, the Naira/Dollar depreciated further across all major dated contracts — 1-month (-0.19per cent), 3-month (-0.32per cent), 6-month (-0.69per cent), and 1-year (-0.17per cent) — closing at N365.43, N372.34, N385.09, and N406.09, respectively.

Analysts at Cordros Capital said, “Our outlook for the Foreign Exchange market remains stable, as higher oil prices and stable production continue to support growth in the foreign reserves, providing the apex bank sufficient legroom to sustain its interventions in the currency space.”

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