Domestic demand on dollar has pressured the nation’s foreign reserves, dropping $290 million in November to $29.9 billion from $30.17billion it closed in October.
The Federal Reserve had loss $170 million to $30.17billion from $30.34 billion it closed in September
The evolution of the foreign exchange demand most especially dollars, in the country has been influenced by a number of factors such as the changing pattern of international trade, institutional changes in the economy and structural shifts in production.
Analysts at FBNQuest Research, a Lagos based research firm noted that the fall in November was greater than that of the previous month due to the rise in domestic demand for dollars.
They said the spill-over from the JP Morgan effect which led to the exit of most investors; the phased removal of Nigeria from its GBI-EM indices of local currency government bonds was completed in October.
According to FBNQuest report, “Considering the widening of the foregin Exchange rate between the official and parallel market, there is still a lot of pressure on reserves.
“The naira to US dollar exchange rate is currently trading at N248 on the parallel market.
“Apart from the administrative measure by the Central Bank of Nigeria (CBN) to exclude access of foreign exchange for certain items from the official window, the CBN recently cut its dollar supply to Bureau De Exchange operators.
“The supply frequency has also been reduced to once a week from bi-weekly,”they explained.
According to the CBN governor, Godwin Emefiele, since the introduction of the Bank Verification Number as a requirement for forex transactions, BDC operators have reduced by half.
This has led to savings of close to US$100m per week.
The nation’s total external reserves are sufficient to provide 5.9 months’ cover for merchandise imports at 2014 levels.
The spot price of UK Brent ranged between $41/barrel and $48/barrel in November.
Last week, The Organization of the Petroleum Exporting Countries (OPEC) failed to reach a decision on a new (lower) production quota.
The oil cartel continues to produce over 30 million barrels per day and as such the supply glut remains.
This is likely to lead to more pressure on foreign exchange and reserves going forward.