CBN Erases Official FX Rate as External Reserve Falls to $34.6Bn
Godwin Emefiele, CBN Chief

CBN Erases Official FX Rate as External Reserve Falls to $34.6Bn

The Nigerian central bank (CBN) has deleted the official exchange rate on its website as the nation’s external reserves tumble to $34.61 billion, of which $209,288.647 million is blocked.

In a note, Alpha Morgan Capital said Nigeria’s FX reserves decreased by US$181.23 million this week as the outflows for the CBN’s interventions across the various foreign exchange windows outweighed dollar inflows.

Due to its weak position, naira lost against the United States dollar at both the Investors and Exporters Window (0.33%) and parallel market (0.31%) to close at NGN411.67 and NGN482 respectively.

The CBN removal of its official rate from website stokes fear of devaluation. However, it is not clear whether a new rate will be announced as the authority is yet to reply email sent to its spokesperson at the press time.

As a result foreign investors’ weak sentiment in the Nigerian economy, foreign currency flows have been limited amidst an increase in demand for greenback for importations and payments for goods and services abroad.

CBN Erases Official FX Rate as External Reserve Falls to $34.6Bn
Godwin Emefiele, CBN Chief

The apex bank participation at the Investors and Exporters Window has declined significantly, trailing the pre-pandemic era.

The monetary policy multi-tiered exchange rate system has been criticised by local and foreign analysts due to the opportunity for arbitrage amidst widening spreads between official and parallel market rates.

Many exporters that seek dollar bills payment via Central Bank have been noted to rarely taken their foreign currencies receipts through organised financial system.

At the current level, Nigerian external reserves provide about 5-months of import cover, which Fitch said in a report is stronger than peers in the Sub-Saharan African region.

Monetary policy authority has been up and doing following its decision to support the local currency in the foreign exchange market, but the weak foreign currencies buffer continues to impacting its weekly interventions.

The exchange rate at the Investors and Exporters window crossed to N410 per dollar while parallel market exchange N480 to a United States dollar, the official exchange rate was quoted at N379 per dollar.

How Weak Naira Affects Your Income, Assets, Finances

CBN has put forward various initiatives and strategies to ensure inflows of foreign currencies into the economy. Though oil price is trading at about $70 per barrel, the nation’s external reserves still remain low.

In a related development, diaspora remittance flows to Nigeria declined 28% in 2020 amidst record receipts into the low-income countries, a development which the World Bank said defied its prediction.

In a new report, the World Bank said remittance flow to Sub-Saharan Africa (SSA) fell 12.5% to $42 billion in 2020, which was solely driven by the reduced inflow into Nigeria.

Other countries in the SSA region reported an uptick as World Bank reckoned that remittance flows remain strong during the COVID-19 crisis despite the pandemic-induced economic lockdown.

According to the report, low- and middle-income countries received $540 billion in 2020, which was $8 billion less than in 2019 despite the pandemic.

“Despite COVID-19, remittance flows remained resilient in 2020, registering a smaller decline than previously projected”, the World Bank group stated.

Officially recorded remittance flows to low- and middle-income countries reached $540 billion in 2020, just 1.6 percent below the 2019 total of $548 billion, according to the latest Migration and Development Brief.

CBN Erases Official FX Rate as External Reserve Falls to $34.6Bn