External Reserves Drops by 23.3%

Nigeria’s external reserve has dropped by 23.3% ($11.3bn) from $48.4bn in May 2013 to $37.1bn as of May 27 this year.

According to a recent data from the Central Bank of Nigeria, the foreign reserves which had witnessed a huge decrease of $4.72bn btw January and April also decreased by 2.62% month-on-month to $37.14bn as of May 27, from $38.14bn a month earlier.

The data also reported that the external reserves which had amounted to $42.85bn at the end of December 2013 was drawn down by the central bank by 11% to $38.13bn  as of April30, 2014, as a result of severe pressure which the naira had faced in recent times coupled with the pressure to meet the foreign exchange demand.

It also stated that the decline in the reserves was determined mostly by the increased funding of the foreign exchange market due to intense pressure on the naira and the need to maintain stability.

The CBN had offered a total of $6.4bn to foreign exchange dealers at its twice-weekly regulated auction within the first eight weeks of this year in order to prevent the naira’s value from crashing.

Also, in order to save the local currency from devaluation, the CBN defended the currency with approximately $26.6bn from the nation’s external reserves.

Between January and December 2013, the central bank also sold about $26.6bn to currency dealers in 94 Foreign Exchange Dutch Auctions.

The data also revealed that the central bank sold about $19.8bn to currency dealers in 72 auctions through the Wholesale Dutch Auction System between January and September last year, while it offered $6.8bn to the dealers in 22 auctions through the Retail Dutch System between October and December.
So as to be able to address hitches in the foreign exchange market, the CBN had on October 2 last year replaced the WDAS with the RDAS because of the ineffectiveness of the former.