Nigeria’s foreign reserves will drop below $34.3 billion by the end of December , the Central Bank of Nigeria (CBN) has predicted.
The apex bank stated this in its report:‘Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2020/2021, released on Sunday. It said by the end of 2020, Nigeria’s foreign reserve is expected to lie between $29.9 billion and $34.3 billion.
It explained the prediction is based on declining oil prices and the impact of the coronavirus pandemic.
“Sequel to the COVID-19 pandemic, the viability of the external sector in 2020 is expected to deteriorate, given the present worsening current account balance and depletion of external reserves, driven, largely, by decelerating export receipts, particularly oil,” the report read.
“Specifically, the degree of external reserves accumulation is expected to decelerate, as outflows are expected to outweigh inflows.
“As a result, external reserves are expected to lie between $29.9 billion and $34.3 billion at end-December 2020 (predicated on current declining oil price between $20 and $40).”
According to the report, Nigeria’s foreign reserve grew marginally by $58.464 million in September.
As of August 29, the reserves stood at $35.665 billion and grew to $35.724 billion as of September 29.
The reserves had continued its upward movement, rising from $35.67 billion as of September 1 to $35.81 billion on September 17.
Prior to September, the reserves rose by $65 million from $35.59 billion as of August 20 to $35.66 billion as of August 27.
This prediction means that Nigeria may not set a new high record as it did in 2019 when it opened the year at $43,075,740,908 to break a six-year record.
The last time Nigeria’s reserves opened above $42 billion was in 2013 when it opened the new year at above $45 billion.
Last month, the CBN Governor, Godwin Emefiele, while addressing bankers at the 13th annual Banking and Finance Conference organised by the Chartered Institute of Bankers of Nigeria (CIBN), said the external reserves stood at $36 billion.
Giving reasons, he said: “Restrictions on global travel by land and air, along with the slowdown in commercial activities, led to a significant reduction in the demand for crude oil. These factors contributed to the 65 per cent decline in crude oil prices between January and May 2020. This decline in prices, along with OPEC reduction of our production quota, led to a significant decline in our foreign exchange earnings, along with a more than 60 per cent decline in revenues due to the federation account. Today, crude oil prices have recovered from its low of $19 in April 2020, but it is yet to return to pre-pandemic levels of over $60 in January 2020. With the decline in our foreign exchange earnings and subsequent adjustments in the value of the Naira vis-à-vis the US dollar, the CBN has continued to implement a demand management framework, which is designed to support improved production of items that can be produced in Nigeria, and further conservation of our external reserves. These measures have helped to prevent a significant decline in our reserves.
Our external reserves currently stand at $36 billion and are sufficient to cover eight months of import of goods and services.