Nigeria’s forex reserves may fall to $33bn – Rewane’s FDC

Nigeria’s foreign exchange reserves may fall to $33 billion in the coming month despite higher crude oil prices, Financial Derivatives Company Limited has said.

The FDC, led by Mr Bismarck Rewane, a renowned economist, noted that gross external reserves continued its depletion trend in February, losing 3.33 percent ($1.21 billion) to close at $35.09 billion on February 26 from $36.30 billion on January 29.

It said the country’s payment and import cover declined to 9.72 months from 9.42 months at the beginning of the month.

The Lagos-based firm said the reserves level has maintained its downward trend this month, losing 1.03 percent ($360 million) to close at $34.63 billion as at March 11.

The import cover fell to 9.30 months from 9.39 months on March 11, it said in its bi-monthly update released on Thursday.

The FDC analysts said, “External reserves are likely to deplete further, towards $33 billion in the coming month despite higher oil prices. This is due to heightened uncertainty about the CBN’s forex policy and a growing dollar demand backlog.

“Also, currency pressures would persist especially at the parallel market and I & E window. This will keep import costs elevated and increase the service costs of dollar obligations. Meanwhile, dollar investments will appreciate in value.”

They said the depletion in external reserves would continue to limit the ability of the Central Bank of Nigeria to defend the country’s currency, the naira, in the near term.

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