Despite the assurance given by managers of the Nigerian economy that the country has enough foreign exchange reserves to meet demands, it has become clear that the nation’s foreign exchange reserves cannot finance the next three months of import. From statistics from the Central Bank of Nigeria (CBN), the reserves fell one per cent month-on-month to $29.5 billion by April 28, from $29.8 billion a month earlier. This implies that the reserves at the current rate of importation can barely support three months of import.
The reserves were down 22.6 per cent year-on-year when they stood at $38.14 billion. The apex bank had used its foreign exchange reserves to support the local currency in the wake of falling global oil prices.
At the foreign exchange market last week, despite dollar auction sales worth $91.2 billion by international oil companies on Monday, the Naira closed flat at N199.10/$1.00 at the inter-bank market. This rate was maintained throughout the week. Similarly, the CBN’s clearing rate steadied at N197.00/$1.00 for the week.
As a follow up to the CBN’s withdrawal limit on overseas card holders to $50,000 (from $150,000) per annum and daily cash withdrawals to $300, the apex bank has further clarified that customers’ cards linked to domiciliary accounts overseas are not affected. Demand for the dollar by travellers may increase locally as a result of this decision. Market operators say they expect the exchange rate to continue to trade within the current level at the inter-bank segment of the foreign exchange market in the coming week.
However, at the Bureaux De Change segment of the foreign exchange market, the Naira depreciated by N3.00 or 0.3 per cent to N220.10/$1.00 from N223.10/$1.00
What is largely responsible for this trend is the fact that the national economy, pre-general elections faced huge financial haemorrhage as politicians, corporate bodies and foreign investors moved funds massively out of the country as well as from Naira to dollar. In January 2015, data available at CBN showed that the sum of $2,196,805,444.97 was paid out by the CBN as international remittances on behalf of Nigerians.
In February, the sum of $1,273,415,392.55 went out as payments.
In a survey of payments made by the CBN on behalf of the public in 2014, a total of $22.1 billion went out of the country in five weeks, an average of $4.5 billion a week. While about $3.083 billion went out in the week ending July 31, 2014, the amount of foreign exchange flowing out of the country rose to $4.2 billion for the week ending August 30. It, however, dropped to $4.1 billion on the 30th of September and moved astronomically to $5.29 billion for the week ending October 31, 2014.
The foreign exchange outflow went further up to $5.35billion for the week ending November 30. This capital flight has resulted in the crash of the naira exchange rate which had remained stable before the election and the crash of the international crude oil price.
By Pita Ochai