External reserves hit two-month high, as naira plunges further

Nigeria’s foreign reserves have hit a two-month high, data released by the Central Bank of Nigeria (CBN) have shown.

Sadly, the naira yesterday plunged to a new low at the parallel market, selling for between N525/$ and 530/$.

According to the data, the gross component of the reserves climbed to $34.1 billion at the start of September while the liquid portion resumed the month at $33.84 billion.

It was the first time the reserves would hit $34 billion since June 8, 2021, when the composite figure stood at $34.07 billion.

The figures dipped to around $33 billion, raising concerns about the country’s ability to fund its rising imports. The recent rise came a few weeks after the board of governors of the International Monetary Fund (IMF) approved the allocation of $3.35 billion to the country as part of its new $650 billion special drawing rights (SDRs) to member countries.

“This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis.

“The SDR allocation will benefit all members, address the long-term global need for reserves, build confidence, and foster the resilience and stability of the global economy. It will particularly help our most vulnerable countries struggling to cope with the impact of the COVID-19 crisis,” Managing Director of IMF, Kristalina Georgieva, had said of the allocation created to assist countries suffering from reserves liquidity crisis.

The rising reserves put the apex bank in a more comfortable position to defend the troubled naira and meet import obligations.

While the external reserves appear bullish, the reverse is the case for the domestic currency, which plunged to a new low at the black market.

According to information sourced from the market, the naira traded around N527/$ band in defiance to the assurances by the CBN and the Bankers’ Committee that the tension at the black market would ease out as banks take a hold of the market.

The Central Bank had earlier stopped the funding of bureau de change (BDC) operators while handing over the sale of foreign exchange (FX) solely to banks, who have been warned to ensure that individuals with genuine need of business personal travel allowances (B/PTAs) are not denied.

Despite the warning, end users have complained of the inability to access dollars. Bankers have insisted that they disburse dollars to those with genuine needs and that the process has been transparent.

The market resumed this week with heightened pressure on the supply, thereby setting a new higher exchange rate. The Guardian had reported at the start of the FX sale regime that the local currency could be heading towards N550/$ as the illiquidity crisis increased.

A few online transaction platforms had upped the rate to as high $535/$ during the week. Responding to the stoppage of the sale of FX to BDCs, some experts had warned of short-term hoarding.

Despite the renewed crisis at the black market, the investors’ and exporters’ (I&E) rate has remained relatively stable, with slight in-trading volatility.

Yesterday, the spot market opened at N411.78/$ while closing at N411.67/$.

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