Nigeria’s forex reserves hit seven-month low

Nigeria’s foreign exchange reserves have dropped below $35 billion to the lowest level in seven months.

The reserves fell to $34.93 billion on Dec. 11, 2020 from $35.33 billion at the start of the month, according to data obtained by Markets Reporters on Monday from the Central Bank of Nigeria.

The last time the forex reserves were below the $35 billion mark was on May 13, falling to $34.91 billion from $35.03 billion the previous day.

The reserves, which have been on a downward trajectory in recent months, declined to $35.66 billion on Nov. 2 from $36.02 billion on July 22.

Amid the economic fallout of the COVID-19 pandemic, the nation’s external reserves fell to a record low of $33.43bn on April 29.

But the reserves started rising after the International Monetary Fund disbursed $3.4bn loan under its Rapid Financing Instrument to the country to tackle the impact of the pandemic.

The CBN had said in a recent report that the external reserves were expected to lie between $29.9 billion and $34.3 billion at the end of this year.

It said, “Sequel to the COVID-19 pandemic, the viability of the external sector in 2020 is expected to deteriorate, given the present worsening current account balance and depletion of external reserves driven, largely, by decelerating export receipts, particularly oil.

“Specifically, the degree of external reserves accumulation is expected to decelerate, as outflows are expected to outweigh inflows.”

Nigeria, Africa’s top oil producer, has been hard hit by the coronavirus pandemic, which caused a sharp drop in the price of oil, its main source of government revenue.

Oil and gas represents only about 10 percent of its GDP, but accounts for about 50 percent of government revenues and over 90 percent of export earnings.

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