Foreign reserves drop to $41.7bn as Naira trades flat at parallel market


Story by Kayode Tokede

The Central Bank of Nigeria has said the foreign reserves dropped to $41.7 billion as at October 4, 2019.

It means within three business days, the foreign reserves dropped by $138 million from $41.8 billion it closed in September to $41.7 billion.

With the unstable global oil prices, the nation’s foreign reserves dropped by $1.76 billion or 96 per cent in September from $43.61 billion it opened to $41.85billion, Nigerian NewsDirect can report.

The apex bank revealed that the foreign reserves dropped significantly in September despite the global oil prices closing stronger at $61.09 per barrel.

The Organization of Petroleum Exporting Countries (OPEC) basket of 14 crudes, the global oil prices was hovering around $58.76- $65.30 per barrel.

Nigerian NewsDirect gathered that the foreign exchange buffer in nine months has depreciated by $1.26billion from $43.12 billion it opened to $41.85billion as at September 30, 2019.

Further findings revealed that the nation’s foreign reserves reached the $45billion mark in June when the global oil prices was trading around $70-$61 per barrel.

The CBN’s Monetary Policy Committee (MPC) at the last meeting noted the unstable oil prices, lamenting over its implications on the accretion of foreign reserves.

The MPC chaired by Mr. Godwin Emefiele had called on the federal government to build fiscal buffers.

Emefiele  in his words said, “the Committee called on the National Assembly to exercise restraint from increasing the oil price budget benchmark to avoid budgetary overruns at the implementation stage of the budget. Projections from the oil futures market, indicate that oil prices will remain tight around the budget oil price benchmark in the medium term.”

Analysts attributed the decline in foreign reserves to unrelenting naira assets sell-offs by offshore investors.

Cordros Capital had said, “Despite the continuous depletion of reserves amidst sell-offs by off-shore investors, our estimate suggests no naira devaluation in 2019, as we believe the CBN has more than enough ammunition to sustain its naira defense. Hence, we expect the naira to remain resilient in the short to medium-term.”

However, the naira traded flat against the dollar at N360.00 against the dollar in the parallel market but appreciated by 0.04per cent to N362.37 against the dollar at the Investors & Exporters (I&E) foreign exchange window.

The overnight lending rate widened by 136basis points to 4.79per cent, as system liquidity became strained ahead of the upcoming  uctions across the Wholesale, Invisibles & SMEs segments.

Activities in the Treasury bills market were bullish, as the average yield declined by 22basis points to 13.03per cent.

Yields contracted across the short (-46bps), mid (-42bps) and long (-5bps) tenor segments of the curve, following Investors buying interest in the 31DTM(-111bps), 164DTM (141bps) and 269DTM (-52bps) bills.

Trading in the Treasury bonds market was bearish as the average yield expanded by 7bps to 14.31per cent. Investors sell-offs of the MAR-2024 (+16bps), JAN-2026 (+15bps) and MAR-2036 (+13bps) bonds, led to respective yield expansions across the short (+4bps), mid (+12bps) and long (+5bps) segments of the curve.