By Seun Ibiyemi
The Central Bank of Nigeria (CBN) drew down Nigeria’s foreign reserves and expended $17.81billion to defend the nation’s weak currency, at the foreign exchange (forex) markets in 2022.
According to the apex bank in its Annual CBN Activity Report, in 2022, the amount it injected was 7.6 per cent higher than the $16.55billion injected in 2021 on intervention at the inter-bank forex market to stabilise the Naira..
This depleted the external reserves from $40.53 billion as of December 31, 2021, to $34.22 billion as of June 26, 2023. Giving details of the intervention, the report explains that $7.12 billion was distributed and sold at the spot market while the sum of $10.69 billion was sold and distributed at the forwards market.
Further breakdown showed that the spot sales comprised $2.46billion at the Investors and Exporters (I & E) window otherwise called the Nigerian Autonomous Foreign Exchange, NAFEX, market. A total of $1.43 billion was sold and distributed at the inter-bank; $1.60 billion for small and medium enterprises (SMEs); and $1.63 billion for invisibles.
However, the apex bank purchased a total of $2.17 billion at the inter-bank market, indicating net sales of US$15.64 billion. During the period, the sum of US$13.53 billion matured at the forwards market while US$8.31 million remained outstanding as of December 2022.
Spending sum of $17.81 billion ostensibly to defend the local currency implied that the bank of last resort had to draw down on the country’s external reserves amid low accretion from oil earnings as Africa’s most populous country battled lower oil production due to oil theft which further worsened the foreign exchange supply resulting to grave liquidity crisis in the foreign exchange (forex) market.
But for Nigeria to live up to its forex expectations, financial analyst, Mr. Marcel Okeke, a former Chief Economist with Zenith Bank, advised the Federal Government to embark on massive export drive.
He added, “Our economy is so import-dependent. Most Nigerians have taste for foreign things; and so, we need massive export drive and reorientation to consume ‘made in Nigeria’ goods and services.
“These are some of the ways to grow the economy.”