Nigeriaâ€™s external reserves continued its downswing in 2014 as it dropped to $41.907 billion at the weekend.
THISDAY checks showed that the current value of the forex reserves represents a decline by four per cent or $1.598 billion, compared to the $43.505 billion it stood at the beginning of the year.
The Central Bank of Nigeria (CBN) has been using the reserves to support the nationâ€™s currency and this has been identified as one of the factors responsible for the deterioration of the reserves.
Deputy Governor, CBN, Dr. Sarah Alade at the weekend reiterated the central bankâ€™s resolve to continue to defend the naira. According to her, the central bank is committed to exchange rate stability.
The central bank did intervene in the interbank market last week in order to stabilise the beleaguered currency.
The naira maintained its value of N155.75 to a dollar at the regulated Retail Dutch Auction System as the regulator supplied a total of $800 million last week. However, at the Bureau De Change (BDC) segment, it dipped by N2 to close at N170.50, just as it closed at N162.33 to a dollar at the interbank market.
CBN Governor, Mallam Sanusi Lamido Sanusi last week said that his biggest headache is the threat to the exchange rate at a time when oil prices are in excess of $110 per barrel and when the country has current account surplus.
â€œThe central bank is not looking for a strong naira. We are not looking for a weak naira, we are simply looking for a stable naira. In a normal world, I should be resisting an appreciation of the currency today and not fighting depreciation.
â€œWe are having a problem that is entirely home-grown. People are literally taking crude oil physically; refining and taking it out in vessels and not paying for it, plus all other leakages in the system,â€ he declared.
But the Financial Derivatives Company Limited (FDC) noted in its latest economic bulletin that there has been increased currency pressure since the removal of the limit on dollar sales to BDCs.
â€œA depreciating naira and depleting external reserves will have a negative impact on the non-food basket,â€ it stated.
It also argued that if the federal government implements the new import duty and levy increase from 20 per cent to 70 per cent on cars and light commercial vehicles, there would likely be a spike of approximately 30 per cent on urban transportation costs.
Furthermore, it argued that there would be inflationary pressure next month as a result of the impact of the new automotive policy tariffs and 50 per cent hike in gas prices.
â€œThe CBN governor has already expressed concerns on the depleting external reserves and has reiterated his determination to defend the naira. However, if the depletion in external reserves continues, an adjustment in exchange rate becomes inevitable.
â€œThe question on everyoneâ€™s lips is when and by how much the currency will depreciate especially at a time when the parallel market rate has appreciated from N176/$ to N170/$ and the interbank exchange rate has moved in the opposite direction to N167/$,â€ it noted.