Nigeria's Foreign Reserves In Steady Decline

Nigeria's foreign reserves is now on a steady decline against the
backdrop of the decision by Central Bank of Nigeria, CBN, to protect
the Naira from depreciation.

As at last trading day on Wednesday, September 23, the reserves had
fallen to $30.485 billion, about $1.139 billion drop from this year's
peak of $31.624 billion recorded about six weeks ago, August 9.

Foreign reserves, which mirrors an economy's relative strength and
ability to finance its imports and foreign investors' obligations, had
witnessed an upward growth since June from $29 billion, reversed the
trend on August 9 and has since been on the decline.

The declining trend, according to financial sector analysts, is a
result of CBN's operations in the foreign exchange market, where it
tries to meet demands at a predetermined exchange rate amidst
declining oil revenue.

However, foreign exchange market reports still indicate continued
excess demand which has continued to put pressure on exchange rate,
while premium on parallel market continue to widen.

The National Bureau of Statistics, NBS, said that the weak performance
of the external sector and its vulnerability to external shocks
reflect the dismal contributions of the non-oil sector and low
produc-tion in the economy.

Many financial analysts have also attributed the outflows to recent
announcement by USA investment banker, JP Morgan, that it was
withdrawing Nigeria from its Government Bond Index for Emerging
Markets, GBI-EM.

Afrinvest Group, a Lagos-based investment banker, said the development
would further pressure the external reserves as funds attracted to the
economy through GBI-EM, will be expected to leave the financial
system.

—Vanguard