Nigeria’s foreign reserves plunged to its lowest level in four years last week, hardly reflecting the marginal gains in rising oil prices in recent months, central bank figures show.
The reserves fell by $222.3 million between May 31 and June 10 to $34.0 billion, according to figures published by the Central Bank of Nigeria.
The last time it fell below that mark was between June and July of 2017.
Infographics showing Nigeria’s foreign reserves average over the period under review
Before recording a gradual slump, the reserves had reached $36.5 billion at the start of the new year. The rise, which began mid-December 2020, was buoyed by a steady rise in oil prices in the international market.
It was unclear why the reserves fell at a time of rising crude oil prices, although similar declines in the past were attributed to the interventions by the apex bank to stabilise the exchange rate. The spokesperson for the CBN, Osita Nwasinobi, did not return calls on Monday.
The CBN, which operates a managed float, periodically supports naira from the reserves, and a lower reserve is expected to affect the value of the currency which closed Friday at 410.80 a $1, 0.1 per cent higher than it traded the previous session.
Foreign exchange reserves are assets held on reserve by a monetary authority in foreign currencies, quite often used to back liabilities and influence monetary policies.
They could be in the form of foreign banknotes, deposits, bonds, treasury bills and other foreign government securities.
Oil revenue constitutes about 60 per cent of Nigeria’s revenue and 90 per cent of Nigeria’s source of foreign exchange earnings, even though it accounts for just 9 per cent of the nation’s GDP.
Oil prices have been relatively stable recently, with Brent price selling above $70 per barrel.