By Ademola Alawiye

Wednesday, 27 Oct 2010

Nigeria‘s foreign exchange reserves have dropped by 7.6 per cent to $33.9bn in October, from $36.7bn recorded in the previous month, the Central Bank of Nigeria, has said. Also, the apex bank has sold dollars to prop up the value of the naira.

According to data from the apex bank, the reserves fell by $24.4bn down from a high of $58.3bn recorded in March 2008.

The Chief Executive Officer, Lagos-based Economics Associates, Mr. Ayo Teriba, said, ”The foreign reserves were partially depleted because the government struggled to meet huge foreign-exchange demands at its twice-weekly foreign-exchange market in September.”

Fitch Ratings had recently lowered its outlook on Nigeria‘s BB- rating to negative from stable because of withdrawals from the excess crude account and a drop in foreign currency reserves.

Fitch had said that the decline in reserves increased the risk to the economy from any renewed drop in oil prices.

Meanwhile, the naira gained to 149.54 to the dollar on Tuesday, from N151.33 on Monday.

An analyst with Afrivest West Africa Limited, Mr. Babatunde Obaniyi, said, ”The outlook is very bleak if you continue to deplete your foreign reserves at this rate, there will come a time when you will have nothing left to cover your imports.”

According to the Finance Ministry, Nigeria relies on crude oil exports for about 95 per cent of its foreign currency earnings.

Source: Punch