ANALYSTS: THE WEAKER NAIRA WILL CAUSE THE DECLINE IN FOREIGN RESERVES TO CONTINUE

According to reports, it would take some time before Nigeria's foreign reserves start to recover from the recent fall.

The Central Bank of Nigeria (CBN) released data on Monday showing that by March 23, 2023, Nigeria's FX reserves would have decreased by $93 million, or 2.53%, month over month.

According to the CBN, on February 23, 2023, FX reserves fell to $36.70 billion.

According to CBN data, the nation's FX reserves also decreased by 3.46 percent from the $37.06 billion they were on January 3, 2023, when the year began.

Due to Nigeria's failure to produce enough dollars to meet its needs, the largest economy in Africa has seen a fall in its dollar savings since last year.

Experts have ascribed the sustained decline of the naira value at all sectors of the dollar markets to the nation's ongoing loss of FX reserves.

The naira fluctuated between N750 and N770 last week on the black market, while it was quoted at N461.3 last week in the official Investors and Exporters' FX window (I&E), down from N461.8.

“This week, we expect to witness persistent pressure on the Naira across all market groups,” the experts at United Capital predict, given that FX headwinds will persist as dollar earnings remain low.

According to investment banking firm Cordros Capital, Nigeria's failure to expand its FX reserves and match the demand would endure over the short-to-medium term. There is no “good signal that suggests the pre-pandemic levels.”

The government's internal forex generation has continued to be undermined by low crude oil production and high premium motor spirit (PMS) under-recovery costs, while foreign portfolio investors (FPIs), who have historically supported supply levels in the official market, have stayed away because of the forex management policy.

The CBN said that it was confident that its many programs, the Naira-4-Dollar program, the RT-200 FX program, and other initiatives designed to promote remittances, would continue to improve the addition to external reserves and increase liquidity.

The rebate on both programs (the RT-200 FX program and the Naira-4-dollar program), in our opinion, is very unattractive to entice exporters and diasporans to the official window given between the official and illicit markets.

Foreign portfolio investment (FPI) and foreign direct investment (FDI) are currently at their lowest levels in more than five years, according to Afrinvest, thus the CBN should shift its attention to capital control regulations and the multiplicity of the currency window.

Despite the CBN's refusal to agree to the parallel market foreign currency rates, the majority of unmet US dollar demands from the official market are shifted to the parallel market. On the black market, the dollar to naira as reached 750 naira to the dollar. This represents an increase of 0.66 percent above the N755/$1 record set in session.

The International Air Transport Association estimates that foreign airlines are stuck with the CBN with $744 million (AITA).

Both producers and exporters have criticized the CBN for rationing.