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Nigeria’s external reserves fall by $1.65bn in 6 months

Published

12 months ago

December 6, 2023

A fall in Nigeria’s foreign reserves by $1.6 billion to $32.97 billion has been observed since the country’s central bank’s recent efforts to unify foreign exchange rates.

In June, the central bank informed all authorised dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange Market: Abolishment of segmentation.

“All segments are now collapsed into the Investors and Exporters window. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks. Re-introduction of the ‘Willing Buyer, Willing Seller’ model at the I&E Window. Operations in this window shall be guided by the existing circular on establishing the window,” the CBN had said in the June statement.

Foreign exchange reserves and the value of the naira have decreased since then. The nation had $34.62 billion in gross foreign exchange reserves as of June 15. However, the foreign exchange reserves fell to $32.97bn as of December 1, 2023, according to data from the CBN.

The Economist Intelligence Unit revealed in its most recent Africa Outlook report that Nigeria lacked sufficient foreign exchange reserves to support its policy of unifying its exchange rates.

It said, “In Nigeria, an unsupportive monetary policy implies that the naira will remain under pressure, while the central bank lacks the firepower to adequately supply the market or clear a backlog of foreign exchange orders, which will keep foreign investors unnerved. High inflation and a continued spread with the parallel market will destabilise the exchange rate regime and result in periodic devaluations.”

Additionally, JP Morgan recently calculated that Nigeria’s net foreign exchange reserves were $3.7 billion after taking into account larger-than-anticipated currency swaps and borrowing against reserves. Though the CBN may source foreign exchange at commercial and semi-commercial rates, it was noted that the low net foreign exchange reserves put pressure on the foreign exchange market.

Sources close to the government have hinted that as part of measures to ensure liquidity in the country’s forex market, the Nigerian government has begun engagement with persons hoarding the dollar, as well as organizations and those found to have looted the treasury, to make them “bring their monies to the mainstream market.”

The Nigerian government has sought to stabilize the country’s economy with two major policy actions: the removal of the fiscal bleeding in petrol subsidies and the unification of the exchange rate. The results have not been positive, with the further fall of its currency value and the sharp rise in the cost of living.

Related Topics:Featured Foreign exchange Naira Nigeria

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Food prices drive second straight monthly hike in Nigeria’s inflation

Published

3 hours ago

November 17, 2024

Ifeoluwa Dada

According to official statistics released on Friday, Nigeria’s inflation rate increased for the second consecutive month in October, rising to 33.88% in annual terms from 32.70% in September, mostly as a result of increasing food costs.

In an attempt to boost economic development and strengthen public finances, President Bola Tinubu devalued the naira and reduced subsidies, which caused inflation to spike in the second half of last year.

As the effects of the naira devaluation started to lessen in July of this year, a slew of hikes in the price of petroleum and devastating floods that destroyed crops once again exacerbated pricing pressures, making the greatest cost-of-living crisis in decades worse in Africa’s most populous country.

According to the National Bureau of Statistics, price increases for basics such as rice, maize, bread, potatoes, and cooking oil prompted food inflation to surge from 37.77% in October to 39.16% year over year.

This year, more than 1.5 million hectares of agriculture have been damaged by torrential rain and floods in 29 of Nigeria’s 36 states, leaving millions hungry and displacing large numbers of people.

In an effort to curb inflation, the central bank has raised interest rates five times this year. On November 26, it is expected to make its final rate decision of the year.

VenturesNow

MTN financial report reveals drop in group service revenue

Published

3 hours ago

November 17, 2024

Ifeoluwa Dada

Due to operational difficulties in Sudan and the depreciation of the Nigerian naira, MTN Group, Africa’s largest telecom provider, announced on Thursday an 18.5% decline in service revenue for the third quarter that concluded on September 30.

With 288 million users in 17 African regions, MTN said that its group service revenue dropped from 156.3 billion rand ($6.99 billion) in the same quarter of the previous year to 127.4 billion rand.

Despite stating that “the naira was less volatile on a sequential basis in Q3 than in preceding quarters,” the business reported a 48.7% decline in MTN Nigeria’s income due to the currency’s depreciation.

Due to a stronger Ugandan shilling than the previous year, Uganda’s largest contributor, MTN South Africa (MTN SA), expanded by a meagre 3.3%.

Due to “subscriber registration regulations in Nigeria and a decline in users in Sudan, where the conflict has displaced millions of people,” the business reported that its subscriber base increased by 1.6% to 288 million.

Given the higher demand in Nigeria despite the legal obstacles, MTN plans to increase its capital expenditures, which it expects would total between 28 and 33 billion rand for the entire year.