Economy
FOREX Reserves Dip By $505.68 Million In August, Biggest Drop In Four Months
By Mario Deepromoter
Nigeria’s foreign exchange (FX) reserves have dipped by about $505.68 million (1.37%) in August 2024.
This is according to the latest data on the reserves from the Central Bank of Nigeria (CBN).
The marginal decline in the country’s external reserves coincided with the Nigerian government’s issuance of a $500 million domestic dollar bond, which is expected to provide much-needed support to the external reserves.
The CBN reported a reduction of $505.68 million, bringing the reserves down from $36.827 billion on August 1 to $36.321 billion by August 29, 2024.
Data from the CBN indicate a consistent decline throughout August, with a notable dip in the final week.
The reserves, which stood at $36.827 billion at the beginning of the month, gradually decreased as the weeks progressed.
By August 8th, the reserves had decreased to $36.848 billion, and by mid-month, they had further dropped to $36.529 billion on August 15th.
The decline continued steadily, reaching $36.444 billion by August 22nd and then $36.321 billion by the month’s end.
First time in four months
The dip represents the steepest monthly decline in Nigeria’s forex reserves since April 2024.
This persistent decline comes after a four-month period of about $4 billion growth in the external reserves. It also means that the reserves have lost about 12.64% of its four-month gain in August 2024.
It further highlights the struggle faced by Nigeria’s financial authorities in maintaining reserve levels amidst ongoing economic pressures, including the need to meet import demands and debt obligations, as well as manage liquidity for the naira’s stability.
What you should know
In the first week of August, the Central Bank of Nigeria (CBN) sold $876.26 million at N1,495/$1 to 26 qualified banks in its latest Retail Dutch Auction.
According to a statement from the CBN, a total bid of $1.18 billion was received from 32 dealer banks. However, bids from six banks were disqualified, as four banks did not meet up with the deadline while two did not provide bids in their submitted templates.
Amid the decline in FX reserves, the Nigerian official foreign exchange (FX) market experienced a marked decline in turnover in August, despite the initial Retail Dutch Auction conducted by the CBN.
Data obtained from the FMDQ by Nairalytics, the research arm of Nairametrics, reveals a reduction of $1.08 billion, with total turnover falling to $3.25 billion, from $4.34 billion recorded in July 2024.
This decline of 25% highlights the ongoing challenges faced by the official FX market in terms of liquidity and stability.
The average daily FX turnover decreased from $189.42 million in July to $144.71 million in August, reflecting a 23.61% reduction. This decline suggests a significant drop in market activity, indicating increasing difficulties in accessing foreign currency.
On August 19, 2024, the federal government of Nigeria officially issued a $500 million domestic dollar bond.
This bond, part of the government’s financing initiatives, has a 9.75% per annum interest rate and is set to mature in 2029.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, stated that the $500m domestic dollar bond will enhance external reserves and help stabilize the foreign exchange situation in the country.
The naira depreciated to N1, 615 per dollar in the parallel market from N1,610 per dollar on Monday.
Likewise, the Naira depreciated to N1,602 per dollar in the Nigerian Foreign Exchange Market (NFEM).
Data published by the Central Bank of Nigeria, CBN, showed that the indicative exchange rate for the naira rose to N1,602 per dollar from N1,596 per dollar on Monday, indicating N6 depreciation for the naira.
Consequently, the margin between the parallel market and NFEM rate narrowed to N13 per dollar from N14 per dollar on Monday.
The Nigerian stock market opened the week on a bullish note on Monday, gaining N228 billion on the Nigerian Exchange Ltd.
Market capitalisation rose by N228 billion or 0.34 per cent and closed at N66.693 trillion compared to Friday’s figure of N66.465 trillion.
Similarly, the All-Share Index (ASI) climbed by 363.57 points or 0.34 per cent, reaching 106,116.18 from 105,752.61 recorded earlier.
The Nigerian stock market opened the week on a bullish note on Monday, gaining N228 billion on the Nigerian Exchange Ltd.
Market capitalisation rose by N228 billion or 0.34 per cent and closed at N66.693 trillion compared to Friday’s figure of N66.465 trillion.
Similarly, the All-Share Index (ASI) climbed by 363.57 points or 0.34 per cent, reaching 106,116.18 from 105,752.61 recorded earlier.
The positive trend was driven by strong buying interest in medium and large-cap stocks including International Breweries, Legend Internet Plc, Cadbury Nigeria, Fidson and more.
In spite of the upward trend, the market breadth closed positively, with 47 gainers and 16 losers.
International Breweries led the gainers’ chart, rising by 10 per cent to close at N8.47 per share.
Legend Internet Plc followed, appreciating by 9.97 per cent to settle at N7.50 per share.
Cadbury Nigeria gained by 9.96 per cent, and end the day at N29.25, while Fidson rose by 9.95 per cent to close at N20.45 per share.
Eterna also advanced by 9.90 per cent to close at N43.85 per share.
On the losers’ chart, Livestock Feeds dropped by 10 per cent, closing at N8.55 per share.
Aradel Holdings declined by 9.86 per cent to end the session at N448.00 per share
Tripple Gee fell by 9.60 per cent to close at N1.79, while John Holt Plc shed 7.94 per cent to close at N5.80 per share.
Linkage Assurance lost by 6.15 per cent, and finished the day at N1.22 per share.
A total of 500.59 million shares worth N12.110 billion were traded in 17,637 transactions.
This is compared to Friday’s 428.08 million shares worth N20.174 billion, exchanged across 14,284 transactions.
Access Corporation led the activity chart with 60.867 million shares traded, which was worth N1.45 billion.
Fidelity Bank followed with 56.105 million shares valued at N1.13 billion while the United Bank for Africa sold 34.53 million shares worth N1.174 billion.
Guarantee Trust Holding Company transacted 33.49 million shares valued at N2.181 billion and the Nigerian Breweries traded 28.336 million shares, amounting to N1.15 billion.
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