By Ayobami Adedinni
Following the Central Bank of Nigeria (CBN) intervention in the foreign exchange market, in order to shore up the nation’s currency, naira, the nation’s foreign reserves have retreated by $569 million in 30 days.
Our correspondent’s findings on the CBN website revealed that the foreign reserves continued to drop in June over the apex bank’s introduction of Investors/Exporters foreign exchange window (IEFX) and Small and Medium-Scale Enterprises foreign exchange window in April.
The foreign reserves as at June 15 was $30.22 billion from $30.78 billion as at May 15, representing a decline of $569 million or 1.85 per cent.
However, the foreign reserves in five months gained $4.49 billion from $25.8 billion it opened this year to $30.3 billion as at May, over stability in global oil prices and increased International Money Transfer Operators (IMTO) inflow.
In a circular entitled “Establishment of Investors and Exporters Window”, the CBN claimed this new window was introduced to boost liquidity in the foreign exchange market and ensure timely execution and settlement of eligible transactions.
The nation’s economy is battling a currency crisis brought about by dwindling global oil prices which tipped its economy into recession and created chronic dollar shortages.
The CBN has been intervening on the official market in the last few months to try to narrow the spread between rates on the official market and black market – sold about $6 billion in five months.
Experts said the new window introduced by the apex banking regulating body is expected to drain the foreign reserves on a short term.
The Managing Director, Cowry Asset Management Limited, Mr. Johnson Chukwu, had attributed the drop to recent intervention by the CBN.
He said, “The CBN has opened a number of foreign exchange windows. There have been a number of interventions such as the retail and wholesale windows.
“The CBN opened a window for exporters and investors and meeting these demands would certainly have exerted pressure on the demands. It is basically because of the help the CBN is doing,” he said.
The apex bank last week had announced that the IEFX window has handled $2.2billion of trade since established, with 70 per cent of the trades accounted for by market participants other than the apex bank.
Interestingly, the Naira remained strong at the IEFX window, where it gained 2.14 per cent Week on week (w/w) against the Dollar to close at N365.29.
In the parallel market segment, the Naira also lost against the dollar (0.82per cent) to N370 but appreciated against the euro (1.06 per cent) and the pound (0.73per cent) to N407 and N465 respectively
At the interbank market, the Naira lost against the dollar (0.05 per cent) and the pound (0.23 per cent) to N305.75 and N402.01 respectively, but gained against the Euro (0.14 per cent) to N351.89.
The foreign exchange reserves grew to around $30.22 billion by June, from $26.44 billion a year ago, as oil production and price stabilized in the wake of Organization of Petroleum Exporting Countries (OPEC) and non-OPEC oil output cut deal, analysts said.
Meanwhile, the naira is expected to strengthen against the Dollar this week as offshore investors pile into locals stocks, currency and financial, analysts have said.