External reserves declined to $38.882 billion on Thursday,
August 11th, 2022, from $39.219 billion at the end of July 2022, according to
data from the Central Bank of Nigeria.
This indicates that the external reserves has lost $563
million since July 18, when it commenced the latest downward trend.
Prior to July 18, the external reserves had maintained a 40
days upward trend, rising by $976 million to $39.445 billion from $38.421
billion on June 6th, buoyed by rise in the price of crude oil, which accounts for
over 80 per cent of the nation’s foreign exchange earnings.
However, analysts at Financial Derivatives Company Limited,
FDC, attributed the declining fortunes of the reserves since July 18 to
increased dollar sales by the Central Bank of Nigeria, CBN, in its bid to
stabilise the exchange rate.
While projecting further decline in the external reserves,
they however maintained that the increased dollar supply by the apex bank will
lead to appreciation of the naira at the official and parallel market.
Making this projection in the FDC Bi-Monthly Economic
Bulletin, they said: “The depletion on the reserves was majorly due to CBN’s
supply of foreign exchange to stabilise the currency.
“The external reserves is expected to continue its downward
trend as the CBN intensifies its efforts to stabilise the currency by supplying
foreign exchange to the I & E (Investors and Exporters) window.
“Because of the country’s low oil production levels, high
oil prices may have less of an impact on the country’s external reserves.
“A constant depletion of the external reserves is likely to
discourage the CBN from supplying foreign exchange in the foreign exchange
market. This could further stoke currency depreciation as demand outpaces
supply.”