The nation’s external reserves, which have been falling in the last few weeks, may drop to $44bn any time from now, financial analysts say.
Two weeks ago, the foreign reserves fell to the $45bn mark, after hovering between the $46bn and $48bn marks for several months, according to data posted on the Central Bank of Nigeria’s website.
Specifically, the reserves fell to the $45bn mark on September 20, and have been dropping steadily since then.
The external reserves had on September 24 dropped to an eight-month low of $45.9bn.
The latest data on the CBN website showed that as of October 8, 2013, the reserves stood at $45.1bn.
Financial analysts say the CBN’s stance to keep defending the value of the naira from falling further will force it to continually dip its hands in the reserves to sustain the move.
The Chief Executive Officer, GTLM Investment, Mr. Izu Jacobs, predicted the reserves would drop to the $44bn mark before the end of October.
He argued the rate at which the reserves were being depleted lately indicated it would continue to drop further.
“It is very obvious the reserves will record $44bn soon, going by the rate it has been falling recently,” he said.
The Managing Partner, Investment Statistics, Mr. Sola Ekundayo, said one of the reasons the reserves had been falling was the fact that the CBN had been using part of it to defend the naira.
According to him, the CBN has been battling money laundering as part of the measures aimed at reducing the amount of dollars in circulation in order to reduce the pressure on naira.
“I believe part of the reserves may still be used to defend the naira in the coming days, hence external reserves may record $44bn any moment from now,” he noted.
The CBN had recently deployed several measures aimed at mitigating the effect of money laundering on the naira.
Within three months, from May 2 to August 5, 2013, the foreign reserves had dropped by $1.8bn from the peak of $48.85bn to $46.98bn.
However, the CBN recently dismissed claims that the reserves were experiencing a sharp decline, adding that the current value of $46bn showed that the fundamentals of the economy remained strong.
Source: Punch (by Oyetunji Adeoye)
