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Why Nigeria’s external reserve is plummeting, sheds $567m in 14 days

Nigeria’s external reserve plummets by $567 million in the first 14 days of December 2020, according to the latest data obtained from the Central Bank of Nigeria (CBN).

The reserves plummeted to $34.85 billion on Monday December 14th, 2020 from $35.413 billion on Friday November 27th.

The trend indicates that the reserves has lost $1.748 billion since May 29th, 2020, when it peaked at $36.594 billion.

The downward spiral in the reserves, according to analysts at Financial Derivatives Company Limited, is expected to continue due to increased dollar sales by the CBN, coupled with lower foreign exchange earnings from oil and non-oil receipts.

The Apex bank continues its interventions across the various foreign exchange (FX) windows despite declining dollar inflows.

In its Bi-Monthly Economic Bulletin, FDC said: “Gross external reserves are expected to maintain the declining trend in the near term. This will be due to the frequent CBN’s forex sales coupled with lower forex inflows.

“Falling external reserves will undermine the CBN’s ability to intervene in the forex market, thus putting more pressure on the naira.”

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