Between October 2nd and October 18th, 2019, the external reserves plunged by $812 million. At $40.95 billion, the country's external reserves hit the lowest reserves in 2019.
In July 2019, the reserves peaked at $45 billion, posting $2 billion increase year-to-date, analysis of the CBN data by Business Insider SSA showed. With this new figure, the country has lost about $5 billion in foreign reserves.
Despite calls by the international organisations and financial experts for a unified currency rate and a market-driven forex market, the CBN continues to use FX reserves to support the currency market.
CBN’s position on foreign reserves
Last Friday, the apex bank injected $325.5 million into the retail segment of the market supporting agricultural machinery and industrial raw materials as well as SMEs.
Isaac Okorafor, CBN's director communication, said the intervention aimed to ensure stability in the forex market would be sustained.
Foreign reserves and why it is important to an economy
Foreign reserves help the country to cater to meet external obligations with global partners. It also helps to absorb shock and prevent economic crises.
Why foreign reserves keep falling
At the end of its Monetary Policy Committee meeting last month, the CBN attributed the decline in external reserves to weakening oil prices and various interventions in the foreign exchange market.
Members, however, suggested that there is a need to avoid monetary policy responses that could worsen the capital flows position, and hence external reserves and exchange rate stability.