Nigeria’s external reserves fell to $33.9 billion on Wednesday, July 19th, 2023 its lowest level in two years.
This is according to data from the central bank obtained from its website. The apex bank regularly updates its external reserves data.
The last time the external reserve touched this level was in July/August 2021.
The country’s external reserve position has been on a downward trend in the last few months as demand pressure for forex spiked amidst lower forex earnings.
This is despite the introduction of the revised I&E Window on the 14th of July 2023.
The external reserve was $35 billion when Tinubu was sworn in as president and $34.6 billion on July 13th, the eve of the changes to the forex policy.
However, a lack of forex supply amidst foreign investment apathy appears to have exacerbated the decline in external reserves.
Nigeria has been struggling with lower foreign exchange earnings over a reduction in crude oil revenues. The country blames the lower oil revenues on crude oil theft.
In addition, a lack of foreign investor inflow due to lower interest rates has also been a drawback in the current government’s quest to reverse the trend.
Apart from calls for a unified exchange rate which have since been acceded to, foreign investors also have issues with the country’s growing debt and its fiscal crisis.
Meanwhile, the exchange rate between the naira and the US dollar closed at N768.16 per dollar at the official Investor and Exporters window on Thursday, 20th July 2023.
Why this matters: External reserves play a crucial role in maintaining the stability of a country’s currency.
Adequate external reserves are essential to ensure a steady supply of foreign exchange (forex) to meet import demands.
However, the declining reserves indicate a potential scarcity of forex, which can lead to challenges in accessing essential imports and hinder economic activities.
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