01 May 2016, Abuja – Amid myriad of restrictive measures to stem the steady slide in the external sector of the economy, a significant reversal of gains has been recorded in the foreign reserves, with latest figures at $27.1 billion as at last weekend, showing a decline by $730 million or about 2.6 per cent in April 2016, against $27.9 billion recorded in March
The March figure was the first growth, though marginal at about 0.14 per cent, ever recorded in recent months.
The April figure, which is now less than six months import cover, also shows a massive 6.4 per cent decline since this year, losing a total of $1.9 billion.
The latest development came against the backdrop of foreign exchange management measures aimed at reducing demand, curtailing speculative purchases, while reining in on exchange rate volatility at the autonomous segment of the market.
Vanguard investigations show that while the first two objectives have largely failed so far since last year, when the policies came into force, a measure of stability in exchange rate had been achieved after the February 2016 all-time volatility was recorded. Exchange rate maintains stability
Almost throughout April, near-stability in exchange rate had been recorded in the parallel market which ranged between N320 and N330/ USD1, while the official and interbank market segment was maintained administratively at N197 and N199/USD1.
As at last weekend, rates were stable at market average of N321/USD1, even as a marginal appreciation of the local currency was recorded early in the week. However, the Central Bank of Nigeria, CBN’s, policies have not been able to address the wide parallel market gap which had spurred excessive and speculative demands in the official segment.
In the same month of April, two major policy moves were made to starve off the demand pressures but the latest reserves position indicates that the policies are yet to yield positive results. The two new policy moves are the currency swaps with China and the special provision and sale of foreign exchange to petroleum products marketers.
China and petroleum products import bills are the largest group of real demands on foreign exchange reserves.
Before the two policies, CBN had last year eliminated over 41 products from its list of eligible products for foreign exchange supply, while following it up with stringent foreign exchange bidding requirements on banks.