Data obtained on Monday from the Central Bank of Nigeria (CBN) showed that from the first business day of this year, January 2, 2019, till Friday, December 6, 2019, the country’s external reserves dropped 8.13 percent from $43.076 billion to $39.576 billion. This represents a decline of about $3.458 billion.
Recall that the reserves have been depleting lately as a result of decline in the price of crude oil on the international market. Oil, which is Nigeria’s mainstay in terms of foreign exchange, has suffered frequent drop in prices at the market as a result of the trade war between the United States and China.
From the data harvested from the CBN, the foreign reserve, as at the opening day in January was at $43.076 billion, but dropped to $42.297 billion at the end of the February 2019, shedding $779 million.
However, by the end of March, the reserves recovered and rose to $44.428 billion. It further increased to $44.793 billion as the end of April and as at end of the month of May, the external reserves stood at $45.123 billion, but dropped by $53.4 million by the close of June to $45.070 billion.
As the end of the month of July, the country foreign reserves had dropped further to $44.903 billion and in August, it fell to $43.608 billion.
Between the end of August and September, the external reserves shed a total of $1.76 billion to $41.852 billion, this extended into October as the reserves further recorded a decline to $40.464 billion.
In November, the CBN data showed that the reserves dropped below the $40 billion mark as the figures closed the month of November at $39.803 billion.
Into the final month of the year, the reserves have further recorded drops and as at Friday December 6, 2019, what is left in the reserves is not more than $39.576 billion.
Recently, when Governor of the CBN, Mr Godwin Emefiele, was asked to speak on the decline in the foreign exchange reserves to less than $40 billion, he said the drop should not cause panic or any agitation for unnecessary policies.
The CBN Chief had said the bank would continue to sustain its intervention in the foreign exchange market despite the drop in external reserves.
“If during the period of recession in 2015 to 2017 reserves dropped as low as $23 billion and yet we still managed our position and we were able to get out of the situation; we are saying now that at even below $40 billion, our threshold is still very high.
“We will never have any fears and there is no need for anybody to worry,” he had stated.
He further said that with crude oil selling at a price of about $63 per barrel, the drop in reserves to less than $40 billion was not enough reason for panic, noting that despite the drop in reserves, the bank’s intervention policy of sustaining the Naira would continue.
Foreign exchange reserves are assets held in reserve by a monetary authority in foreign currencies. These reserves are used to back liabilities and influence monetary policy. These are foreign banknotes, deposits, bonds, treasury bills and other foreign government securities.
These assets serve many purposes but are most significantly held to ensure that a government or its agency has backup funds if their national currency rapidly devalues.