By Stanley Opara with agency report

Friday, 22 Oct 2010

Nigeria‘s foreign exchange reserves rose marginally to $34.72bn by mid-October from $34.59bn at the end of last month, enough to finance more than a year of imports, the Central Bank of Nigeria said on Thursday.

The country has drawn on its forex reserves to support the naira in recent weeks, amid high demand for dollars from fuel and rice importers.

Higher government spending, according to Reuters on Thursday, has also put pressure on forex reserves, which stand more than 20 per cent below the level they were a year ago.

The CBN had said recent strong demand for the dollar was temporary and that the pressure was easing.

The naira has strengthened against the dollar at both the interbank market and CBN auctions this week due to month-end dollar sales by some energy firms and the central bank supplying enough dollars to meet demand at its auctions.

The Nigeria‘s foreign exchange reserves had dropped by 15 per cent to $34.57bn as at October 5, compared to $40.75bn the same time a year earlier.

According to the apex bank, the reserves had been declining, shedding seven per cent from the middle of last month to the end of the month.

”The current external reserves level is still adequate and is expected to remain robust in view of the favourable outlook for oil prices and output,” the Governor, CBN, Mr. Lamido Sanusi, said at the last monetary policy meeting.

Forex reserves in Nigeria had been under pressure since last month with strong local demand for the United States dollar by gasoline and rice importers, leading to a depreciation of the naira currency.

The naira last month fell to its lowest level in 13 months but had since firmed on support from the CBN.

Analysts said reserves could finance more than 12 months of imports in Nigeria where more than 80 per cent of the country‘s basic needs are sourced from abroad.

 

Source: Punch