External reserves lose $112m in five days

The nation’s foreign reserves have fallen by $112m in five days to $28.960bn; the latest figures obtained from the Central Bank of Nigeria have shown.

The loss, recorded between December 31 and January 6, was the biggest in Nigeria’s reserves since the CBN implemented the use of Bank Verification Number in the forex trading.

In just one day (January 4 – January 5), the data showed that the nation lost $20m, dropping from $28.978m to $28.958m.

The external reserves declined by 15.79 per cent year-on-year to about $29.070bn on December 31, 2015, compared to $34.52bn a year ago, according to data from the CBN.

The interbank foreign exchange market was closed by the CBN on December 21, 2015 to conserve forex for an opening on January 4, 2016, leaving the parallel market as the only source of forex through the festive period.

The CBN, however, said it was planning to implement a new guideline for forex trading on the parallel market to curb speculation and forex scarcity.

There have been several calls for flexibility in the foreign exchange policies of the CBN as businesses continue to take a toll from the policies.

The Managing Director, International Monetary Fund, Christine Lagarde, had in a meeting with Buhari on Tuesday stressed the need for flexibility with monetary policies in order not to deplete the reserves.

She said, “We believe that with very clear primary ambition to support the poorer people of Nigeria, there could be added flexibility in the monetary policy, particularly if as we think the price of oil is likely to be low for longer (period).

“The occurrences should not deplete the reserves of the country, simply because of being seemingly rigid. I’m not suggesting that rigidity be totally removed, but some form of flexibility would help.”

Lagarde also said, “A nation’s foreign reserves are usually an indication of the health of its international trade, with import-dependent countries often disadvantaged in their current account balance as a result of forex expenditure outstripping income.”