The Central Bank of Nigeria (CBN) increased intervention in the foreign exchange market not withstanding, Nigeria’s external reserves depreciated by $866.2 million or 2.26 per cent in October 2022 to $37.39 billion from $38.255 billion it opened in the month under review.
In just 10 months, the nation’s foreign exchange buffer has depreciated by $3.13 billon or 7.73 per cent from $40.5 billion to $37.39 billion as of October 31, 2022.
Analysts attributed the decline in external reserves to increasing intervention by the CBN bank in SMIS, and Investors & Exporters (I & E FX) windows to stabilise the naira exchange rate, lamenting the dwindling inflow from crude oil, among others.
They said the crisis in Niger-Delta relating to oil theft and dwindling production has impeded the external reserves growth despite increase in global oil prices.
Speaking, the CEO, Wyoming Capital and Partners, Mr. Tajudeen Olayinka said the decline is an indication of limited or inadequate accretion to external reserves.
According to him, “We know that the only major contributing source to foreign reserves is crude oil exports, and since Nigeria is not able to meet her Organization of the Petroleum Exporting Countries (OPEC) production quota, it follows therefore, that external reserves will suffer such level of inadequacy.
“It also confirms inadequate inflow from foreign investors (FPI (portfolio) and FDI (direct)) due poor exchange rate management and multiple macroeconomic headwinds, while the urge to import raw materials and finished goods from other countries rages unabated.”
Analyst at PAC Holdings, Mr. Wole Adeyeye added that, “The dwindling crude oil production and continuous intervention by the CBN in the official market might have contributed to the drop in external reserves in October.
“The bulk of our foreign exchange earnings come from the oil sector. However, Nigeria has not been meeting its OPEC crude oil production quota due to the oil theft and pipeline vandalism.