The nation’s external reserves fell by $567 million in the first two weeks of this month.
According to the latest data from the Central Bank of Nigeria (CBN), the reserves dropped to $34.846 billion on Tuesday December 15th from $35.413 billion on Friday November 27th.
The trend indicates that the reserves has lost $1.748 billion since May 29th, 2020, when it peaked at $36.594 billion.
The downward trend in the reserves, according to analysts at Financial Derivatives Company Limited, is expected to continue due to increased dollar sales by the CBN coupled with lower foreign exchange earnings from oil and non-oil receipts.
In its Bi-Monthly Economic Bulletin, FDC said: “Gross external reserves are expected to maintain the declining trend in the near term. This will be due to the frequent CBN’s forex sales coupled with lower forex inflows.
“Falling external reserves will undermine the CBN’s ability to intervene in the forex market, thus putting more pressure on the naira.”
Meanwhile, the naira remained stable in the Investors and Exporters (I&E) window last week as the indicative exchange rate remained N394 per dollar.
However, Managing Director/Chief Executive of FDC, Bismarck Rewane, projected that while the pressure on the naira might subside in the first quarter of next year (Q1’2021), it will resume in the succeeding quarters with the possibility of another currency adjustment.
He gave this projection while speaking at the monthly Lagos Business School breakfast meeting last week.
Rewane said: “Currency pressures will taper temporarily in Q1’21 on World Bank loan disbursement and possible increase in Diaspora remittances
“Pressures expected to resurface on increased capital outflows, heightened forex demand and dollar dearth driven by weak macroeconomic fundamentals.
“Another currency adjustment likely in 2021 with the I&E window exchange rate oscillating between N440 per dollar and N450 per dollar.”