Nigeria’s foreign exchange reserves reached a six-year low of $32.87 billion as of the end of December, according to data released on the CBN’s website on Friday.
The central bank had been selling dollars to support the struggling naira currency.
This year alone, the naira has depreciated by over 50%, making it the third worst-performing global currency occasioned by the unification of the foreign exchange market in June.
The Central Bank of Nigeria (CBN) depleted its foreign exchange reserves, which had reached a peak of $47.63 billion in June 2018, to defend the naira.
By December, the dollar reserves of Africa’s largest economy had decreased to a level not seen since September 2017, settling at $32.16 billion.
The data conflicts with the estimation of J.P Morgan that Nigeria’s net foreign reserve at the end of 2021 stood at $3.7 billion.
Speaking on the development, FX markets analyst at London-based Ballinger & Co. Kyle Chapman told Reuters that the naira has faced a turbulent year, marked by a backlog of unresolved forwards, unfulfilled commitments of dollar inflows, and a two-decade high in inflation.
The naira has been under pressure in the past few years exacerbated by an FX backlog estimated by CBN Governor, Yemi Cardoso to be in the region of $7 billion. This coupled with a reduction in foreign capital and low FX earnings from oil sales has put the naira in its current position.
The naira yesterday fell to a new low on the official window to N1,043.09/$ according to the naira metrics daily exchange rate tracker.
The CBN had promised earlier to clear FX backlogs in a matter of weeks, but it seems only a fraction of the total backlogs have been cleared as the two-week duration wasn’t feasible.
FMCG multinational PZ Cussons reported cash repatriation of its holding company but noted that total repatriation of its cash trapped in Nigeria will be completed by the end of FY 2024.
The Minister of Finance announced in October that Nigeria expects around $10 billion in foreign exchange in the weeks, but that has not seemed to materialize.