The foreign reserves, on April 1, stood at $34.85 billion, representing $404 million increase compared to $34.41 billion on March 11.
The uptick in reserves has been attributed to CBN’s ‘Naira for Dollar’ policy which has seen dollar inflows pass through commercial banks, instead of unofficial channels.
The CBN Governor, Godwin Emefiele, said the ‘Naira for Dollar’ policy, gives N5 rebate for every $1 sent by Nigerians in diaspora to the country, which is paid directly to the account of the beneficiaries, following receipt of the remittance inflows.
The CBN had promised that the new policy would provide Nigerians in the Diaspora with cheaper and more convenient ways of sending remittances to Nigeria.
Defending the dollar policy, Emefiele said the move was also to increase the transparency of remittance inflows and reducing rent-seeking activities. He expressed optimism that the new policy measure will encourage banks and financial institutions to develop products and investments vehicles, geared towards attracting investments from Nigerians in the diaspora.
Reiterating the provision a new circular on remittances, the CBN boss said the bank introduced the rebate of N5 for every $1 of fund remitted to Nigeria, through International Money Transfer Operators (IMTOs) licensed by the Central Bank in order to incentivise the process of remittance.
He emphasised that the new measure would help to make the process of sending remittance through formal bank channels cheaper and more convenient for Nigerians in the diaspora.
Also helping reserves accretion is the continued rise in benchmark Brent crude oil price, which stood at $63.29 per barrel as at April 8, representing about $23.29 above the $40 per barrel benchmark for 2021 budget.
Foreign Reserves
On the foreign reserves, Fitch Ratings, a global rating agency predicted that Nigeria’s external reserves would rise to $42 billion by year-end.
In a report titled, “Depreciatory Pressures on Key Sub-Saharan African Currencies to Lessen,” Fitch Ratings had hinged the forecast on its expectation that Brent crude would average $53 per barrel, compared to the $43.1 per barrel recorded in 2020. Moreover, the agency anticipated that the CBN would allow the official naira exchange rate to depreciate further over the course of 2021, notwithstanding improved terms of trade and foreign exchange reserves.
“Given rising oil prices in 2021, we expect forex reserves to rise to an average of around $42 billion in 2021 (around eight months of import cover), compared to $36 billion in 2020.
“However, this will not negate the impact of persistent depreciatory pressures on the naira, notably as a result of rising dollar demand driven by the domestic economic recovery,” it stated.
