Menu

Nigeria’s foreign exchange reserves have fallen by over $1.1 billion from $28.98 billion recorded as of January 4, 2016 to $27.86 billion reported on February 11 by the Central Bank of Nigeria.

Oil prices have plummeted from an average of $60 per barrel when Nigeria’s foreign exchange reserves were about $34 billion 12 months ago to an average of $30 per barrel in 2016.   

As a result of protracted slump in prices of oil and reduced government revenues, the CBN has resorted to unconventional measures to protect the country’s FX reserves. In June last year, the apex bank banned the sale of foreign exchange for the importation of about 41 items. More recently, the CBN stopped the sale of forex to bureau de change operators and also suspended the daily auction of forex to commercial banks.

At the end of its Banker’s Committee meeting on Thursday, CBN officials hinted that the apex bank could tighten its forex policies further by stopping the sale of forex to pay for overseas school fees and medical bills.

Tokunbo Martins, the CBN’s Director of Banking Supervision, said the demand for forex for the payment of school fees and medical bills is crowding out the demand for forex by the real sector such as manufacturing, agriculture, solid minerals among others.

“We need to focus on the real sector,” Martins said. “The pressure on foreign exchange now from school fees abroad is significant. At what point do we begin to look inward? The pressure on medical is significant. At what point do we begin to look inward? And I think as Nigerians, we also need to be patriots in terms of our sentiments.”

The forex restrictions have led to increased demand for dollars from alternative sources leading to the weakening of the naira at the parallel market to about N325 against the dollar as of February 11th. The CBN has kept its official exchange rate at N199 per dollar.