External reserves drop by $1.2bn
The nation’s foreign exchange reserves fell by $1.2bn in one month, latest data from the Central Bank of Nigeria showed on Monday.
The external reserves, which stood at $47.11bn as of the end of July, declined to $45.83 on August 31, 2018.
The CBN noted that the evolution of the forex market in the country had 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.
Experts have attributed the fall to uncertainties in the economy, as a result of anxieties ahead of the country’s political elections.
In a recent interview, a former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, who described oil as the nation’s major revenue earner, said the reserves had grown in recent months because oil price was increasing, and production was constant.
He, however, said political uncertainties had led to a decline in foreign investment as many investors were taking their funds out of the country.
“So, I believe that what must have happened is that those of them whose investments are short-term like shares and bonds, have found their way out of Nigeria,” he added.
He observed that most of the investors had not really been investing in the real sector.
According to Nzekwe, generally, a lot of people are not sure of what will happen during elections.
He added that although the government was investing in infrastructure, the investments in infrastructure were mostly being constructed by foreigners with foreign materials.
He said, “So basically, it will have some impact on the reserves but I believe that the major one is the foreign investment in the financial market and they are all short-term investments.”