Nigeria’s external reserves decreased by about $3.5billion within the first half (H1) to June.

The Central Bank of Nigeria (CBN) data on the movement in reserves show gross external reserves which stood at $38.448billion as at May decreased to $37.369billion as at June 26. The nation’s gross external reserves was $40.877billion as at closed year 2024.

The apex bank is yet to release external reserves figures for June 27 and June 30, but it has been on consistent decline since June 2 when it was $38.391 billion.

The gross external reserves depleted by about $1.07billion within three weeks and five days in this June, according to data at the Central Bank of Nigeria (CBN).

“CBN’s published gross foreign reserves closed the week at $37.37billion, down by $293.87million or 0.78 percent week-on-week (w/w). We expect the Naira to remain relatively stable in the near term, supported by continued foreign portfolio inflows and improved FX supply from non-bank corporates and exporters.

“However, the moderate decline in gross external reserves and the relatively modest FX inflow from the CBN suggest that the market may remain sensitive to demand side pressures,” Coronation Research analysts said in their June 30 note.

“There is also some concern on oil prices and production numbers and their effect of FX inflow from oil sales. Sustained investor interest in fixed income assets, if maintained could help anchor sentiment, though further stability will hinge on the pace of reserve accretion and the Central Bank’s ongoing intervention strategy,” they added.

Last week, the Naira appreciated by 52 basis points week-on-week (WoW) at the official market to close at N1,539.24/$, from its previous close of N1,547.36/$. Similarly, the Naira appreciated by 157bps at the parallel market to settle at N1,570/$ from its previous close of N1,595/$. Also, week-on-week, Nigeria’s external reserves fell by 91bps to settle at $37.369billion (previously, $37.714billion).

Brent slid below $68 per barrel and WTI dropped to $65.55 per barrel, down from $77 per barrel and $73 per barrel respectively at as the preceding week close. Crude oil prices fell sharply last week as geopolitical tensions in the Middle East eased, with Israel and Iran halting hostilities.

The 12-day war, which began on June 13 following Israeli strikes on Iranian nuclear and military sites, initially lifted Brent above $80 per barrel especially as the US launched its own limited strikes as well, but prices slumped to $67 per barrel after US President Trump announced a ceasefire between Iran and Israel.

The Central Bank of Nigeria (CBN) has continued to take steps to ensure higher reserves accretion, stable naira and elevated dollar liquidity. Olayemi Cardoso, governor of the CBN had noted that the strengthening of Nigeria’s external reserves is a key indicator of economic resilience.

“Our foreign exchange reserves have now risen to over $38 billion, giving us close to 10 months of import coverage. This provides the country with a more robust buffer to withstand external shocks such as falling oil prices or global market volatility, thereby protecting the economy,” he explained.

The CBN had activated measures that will ensure that more dollars accrue to the economy – this includes taking measures to improve Nigeria’s export potential, promoting backward integration principles to reduce import of items that can be produced locally and simplifying dollar remittances to the domestic economy for Nigerians in diaspora.

Cardoso said during a recent visit by Airtel Africa’s management team, led by Sunil Taldar, its Group CEO that over the past 16 months, the CBN has worked to stabilise the foreign exchange (forex) market, strengthen the Naira, and attract investors.

“We expect the Naira to hover at current levels if there are no substantial shocks. We anticipate the CBN will continue to defend the Naira in the Foreign Exchange Market. Ultimately, CBN’s intervention would sustain the Naira at current levels with a possibility of marginal gains.

“Similarly, inflows from remittances and other FX earnings might support the Naira in the new week. However, legacy issues, debt service pressure, speculations, hoarding, insufficient supply of FX etc would continue to weaken the Naira in the FX market,” Lagos-based United Capital research analysts said in their recent investment view. (BusinessDay)

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