Nigeria’s foreign exchange reserves have declined by $2.15 billion in the last thirty days, following the Central Bank of Nigeria (CBN) decision to defend the naira.
The Nigerian reserves have dropped by $1,541,891,539, since the United States Federal Reserves raised interest rates on September 26, 2018, as investors continue voting their monies out of the Nigerian economy.
Nigeria’s reserves moved from $44,458,822,331 on September 26, 2018 to $42,916,930,792 as at October 16, 2018.
In a statement issued by the American central bank in September, the Fed decided to lift the benchmark overnight lending rate by a quarter of a percentage point to a range of two per cent to 2.25 per cent.
Explaining the effects of this on the Nigerian economy and reserves, spokesperson of the CBN, Isaac Okorafor, said the fall in reserves is due to a hike in interest rates by US Federal Reserve and the CBN’s interventions in the forex market.
Okorafor explained that investors who had left the world’s biggest economy for emerging markets like Nigeria, Brazil, China, due to low-interest rates are returning to the US, following the increase in rates.
“You can see that the reversal of capital flows which is eating most economies and bringing about depreciation in their currency,” Okorafor had said.
Similarly, CBN governor, Godwin Emefiele, also explained in Bali, Indonesia, that in order to avoid depreciation in the Nigerian currency, the bank would have to defend the naira, via interventions in the foreign exchange market.
“You can only build reserve buffers if you want to hold on to the reserves while allowing your currency to go and wherever it goes is something else,” Emefiele had said.
“It is a choice we have to make and at this time, the choice for Nigeria is to maintain a stable exchange rate so that businesses can plan and we don’t create problems in the banking system.”
Nigeria’s foreign reserves stood at $42,916,930,792 as on Tuesday, October 16.
President Muhammadu Buhari has made it clear time and again that his government will do all in its capacity to defend the naira from further depreciation.