CBN douses tension over dwindling foreign reserves

With Nigeria’s foreign reserves constantly going south in the last months, the Central Bank of Nigeria (CBN) has assured Nigerians not to panic, saying it was the effects of a hike in interest rates by the US Federal Reserve as well as the interventions in the forex market.

CBN spokesman, Isaac Okorafor, disclosed this on Thursday in Abuja at the ongoing 13^th Abuja International Trade Fair.

Data from the CBN website shows reserves have dropped to $44 billion as at the 2nd of October 2018 from a high of $47.8 billion in May.

He said though the reserves dropped by $1.45 billion in one month, Nigerians must understand that the reserves level is a moving figure which always fluctuates.

“You’ll recall that there was a time we survived on even $23.2 billion, the economy was running. Now, we are over $44 billion and the reason why it’s going down gently is because there’s a global squeeze on emerging markets: the Central Bank of the USA which is the Fed had been raising interest rate and you know international capital goes to where it earns better returns.

“So, those who came into our economy to take advantage of the returns here seems to have found better returns in the US and it’s not just in Nigeria, it’s happening to South Africa, Egypt, Pakistan, Iran, Argentina, Brazil, Turkey even China.

“China has lost over 1.3 per cent of its currency. Argentina lost 134 per cent; Iran, India, some of them lost 18 per cent, 17 per cent, but here in Nigeria, our currency has gained six per cent in the last one year.

“You can see that the reversal of capital flows which is eating most economies and bringing about depreciation in their currency is not affecting us for two reasons — we’ve built enough buffers of reserves to be able to tackle situations like these.

“Secondly, we’re using the reserves to defend the value of our currency. So that also accounts for why it’s dropping.

“Investors who brought in dollars, of course, we have a capital importation policy. If you bring your dollars, when you’re leaving, we give it to you.”

Okorafor said the reserves can support between 17 and 18 months of import whereas the international standard is three months import.

At present, Nigeria has $44 billion in its foreign reserves.