The nation’s foreign reserves depleted by a whopping $1.6 billion in January, wiping out remarkable accretion in December 2024.
Specifically, the reserves, which are not only for the sustenance of external obligations and import financing, but also as status symbol and respect lost about $592.58 million, representing 2.84 percent in the month under review, raising concerns about Nigeria’s external liquidity.
The latest figures from the Central Bank of Nigeria (CBN) show that reserves fell from $40.88 billion at the end of December to $39.72 billion as of January 31, 2025, the highest in eight months.
Amid the development, CBN continued withbits benevolence extending the $25,000 weekly forex purchase window for BDCs until May 30, 2025
Some analysts say, with the rising debt repayment obligations, CBN’s defence mechanism for Naira will continue to mount pressures on the local currency with the attendant volatility in the market.
They further argue that January’s sharp decline may not be unconnected to CBN’s largesse to the BDC operators, as it continues to intensify it’s efforts at stabilising the exchage rate so as to bring confidence and sanity into the market.
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However, the regulatory bank continues to adopt series of reforms in the FX market, including restricting BDCs from sourcing FX directly from official channels as they were seen as major contributors to the prevailing market volatility and widening of gap between the official and black market rates.
Consequently, CBN, in December 2024, reintroduced controlled sales of FX to BDC operators.
While the analysts acknowledged that sustaining the $25,000 cap has the potential of controlling distribution and possibly preventing roundtripping, they continue to express concerns about long-term forex availability, alleging sharp practices within the BDC segment of the retail market.
According to some of them, while the CBN feels it’s doing enough in monitoring their operations, there’s need for the overhaul of the segment of the market, beaming searchlight on the composition and activities of the individual operators.