Nigeria’s foreign reserves slipped to its lowest level in three months, closing last week at $31.318 billion.
The last time the reserves reached this region was on July 5 when it closed at $31.581 billion and thereafter peaked at $35.071 on September 12.
Worries over the foreign reserves movement and the value of the naira have risen lately following the increased demand for foreign exchange and the seeming penchant of the Central Bank of Nigeria (CBN) to defend the value of the naira. CBN governor, Lamido Sanusi was however quoted last week as saying that it would not defend the naira at all cost, suggesting that the regulator could allow some interplay of market forces to determine its value.
The naira struck a record low of 164.85 to the dollar at the interbank market after this comment.
Some experts have attributed the depletion of the reserves to inefficiencies in the foreign exchange management which has created loopholes for speculators to capitalise on.
“This implies that there are additional, unknown pressures on forex reserves, which explains why the naira has only traded in the top half of the NGN150/$1 (+/-3%) trading band year to date,” said Yvonne Mhango, Sub-Saharan Africa economist at Renaissance Capital, an investment bank focused on emerging markets, in her September notes on Nigeria.
The naira broke through the band set by the CBN, trading at the official bi-weekly Wholesale Dutch Auction System (WDAS) on Wednesday at N154.6 to the dollar, as the Central Bank sold about $1.45 billion at the last three auctions at the official window to meet growing demand for foreign exchange.