The Central Bank of Nigeria, CBN, has warned the government to look beyond oil revenue and diversify the economy as the country’s foreign reserves fell by $373.23 million from $36.57 billion on June 1 to $36.2 billion on June 29.
The reserves maintained a steady rise at a level of $33.52 billion as of April 30, before commencing its downward trend in June, the Apex bank revealed.
The reserves previously hit a high of $45.17 billion on June 11, 2019, but lost $11 billion leaving the figure at $33.89 billion as of April 28, 2020.
A credit rating agency, Moody’s Investors Service said Nigerian banks’ foreign currency funding gap would rise to $5bn over the current low oil prices, volatile foreign inflows and lower remittances amid coronavirus pandemic.
The Agency in its July 2020 report, themed “Renewed foreign-currency shortages highlight vulnerability for banks”, noted that these challenges were threatening to renew the foreign currency liquidity pressures that blighted Nigerian banks during a previous oil crisis in 2016-2017.
An expert at Moody, Peter Mushangwe, said, “Lower dollar inflows at a time when foreign currency borrowing will likely be more expensive for Nigerian banks will strain their foreign currency funding, despite substantial improvements compared to 2016.
“Our moderate scenario where foreign-currency deposits decline by 20 per cent, while loans remain constant, would increase rated banks’ funding gap to N1.5tn translating to $3.8 billion, and to N1.9tn translating to $5.0 billion under our severe-case scenario of 35 per cent foreign-currency deposit contraction, creating acute funding challenge”.
The last Monetary Policy Committee, The CBN Governor, Mr Godwin Emefiele, had said the need for government to urgently reduce reliance on oil revenue by gradually diversifying the economy and improving tax collection cannot be over emphasised at such a time as this.