Foreign reserves dropped below $30 billion for the first time in more than four months, putting more pressure on the Central Bank of Nigetia (CBN)’s bid to defend the naira and avoid devaluation.
Gross reserves slipped to $29.92 billion on November 30, the first time they have fallen below $30 billion since July 13, according to data from the CBN.
They have fallen by 20 per cent since the end of June 2014 when Brent crude prices began a more than 60 plunge, hammering the finances of Africa’s largest economy and biggest oil producer.
“With the oil price remaining low, the pressure isn’t dissipating.It raises questions about how long the central bank can continue defending the naira,” Ikechukwu Iheanacho, who manages N40 billion ($202 million) stocks and bonds for Lagos-based Chapel Hill Denham Securities Ltd, said.
The naira has been all but fixed at N197-N199 per dollar since early March after the CBN governor, Godwin Emefiele, restricted bank access to foreign exchange, even as other major oil exporters such as Russia, Colombia, and Angola let their currencies weaken.
In June, Emefiele stopped importers of about 40 items, including toothpicks and glass, from obtaining dollars.
Emerging-market investors including Aberdeen Asset Management Plc, Alliance Bernstein and Investec Asset Management have sold Nigerian bonds and stocks this year to avoid what they see as an inevitable devaluation, which would cause losses on their holdings in foreign-currency terms.
Deputy Governor Sarah Alade told bankers last month that the Abuja-based regulator would further curb dollar supplies because its reserves were running short.
The naira rose 0.6 percent to N197.90 per dollar at 12:48 p.m. Yesterday in Lagos. Forwards prices suggest the naira will fall 19 percent to N243 in a year , said Bloomberg.
Source : Leadership