In the first month of 2022, Nigeria’s foreign reserves declined by 1.2% and shed $481.4 million in the process.
According to figures made available by the Central Bank of Nigeria (CBN), the West African country’s foreign reserves dropped from $40.52 billion recorded in December to $40.04 billion as of January ending.
Business Insider Africa understands that the decline was due to the apex bank’s ongoing intervention scheme in the country’s forex market. For a long time, the CBN has been supplying dollars to help meet forex demands and stabilise the currency market. For context, the CBN supplied as much as $8.97 billion in the third quarter of 2021 alone through the Importers & Exporters window.
It should be noted that the crash in oil prices back in 2020 (which was caused partly by the COVID-19 pandemic) had contributed towards worsening Nigeria’s forex crisis.
As you may well know, crude oil is the mainstay of the Nigerian economy. What this means is that the country generates much of its forex earnings through crude oil sales. The higher the crude prices, the higher the revenue the country generates, and vice versa. Little wonder the 2020 oil price crash had resulted in a drastic decline in Nigeria’s capital importation; a situation that had inevitably put immense pressure on forex supply in the country. And the CBN has been doing everything it can to stabilise the market, including supplying dollars into the forex market.