By Babajide Komolafe
The reserves had been on the downward trend since October 29th, when it peaked at $41.828 billion, after 12 weeks accretion courtesy of the $4 billion Eurobond auction proceeds last September and surge in price of crude oil.
Data from the Central Bank of Nigeria, CBN, showed that this trend persisted in the first three weeks of the year, falling to $40.376 billion on Wednesday last week from $40.510 billion at the end of December last year. This indicates a year-to-date decline of $144 million as at Wednesday January 19th.
This also indicates that the reserves have fallen by $1.45 billion in 11 weeks since October 29th.
The trend, according to analysts, is fuelled by increased foreign exchange supply by the CBN, in its bid to stabilise the exchange rate.
Projecting that the downward trend will persist and further impede the ability of the apex bank to intervene in the forex market, analysts at Financial Derivatives Company stated: “The gross external reserves is expected to maintain its downward trend especially as visiting family and friends leave and dollar inflows dwindle. However the impact of this is expected to be offset by higher oil prices.
“Falling external reserves impedes the CBN’s ability to intervene in the foreign exchange market. In addition, the impact of travel bans will continue to negatively impact forex supply. Forex shortages amid high demand will lead to a depreciation in naira at the forex markets.”
