Nigeria’s external reserves dropped by $337 million in the first two weeks of August, sustaining its southward movement since the middle of last month.

Data from the Central Bank of Nigeria showed that the external reserves fell to $38.882 billion on Thursday August 11th, 2022, from $39.219 billion at the end of July 2022.

This indicates that the external reserves has lost $563 million since July 18, when it commenced the latest downward trend.

Before July 18, the external reserves had maintained a 40 days upward trend, rising by $976 million to $39.445 billion from $38.421 billion on June 6th, buoyed by rise in the price of crude oil, which accounts for over 80 per cent of the nation’s foreign exchange earnings.

However, analysts at Financial Derivatives Company Limited, FDC, attributed the declining fortunes of the reserves since July 18 to increased dollar sales by the Central Bank of Nigeria, CBN, in its bid to stabilise the exchange rate.

While projecting a further decline in the external reserves, they however maintained that the increased dollar supply by the apex bank will lead to an appreciation of the naira at the official and parallel market.

Making this projection in the FDC Bi-Monthly Economic Bulletin, they said: “The depletion on the reserves was majorly due to CBN’s supply of foreign exchange to stabilise the currency.

“The external reserves is expected to continue its downward trend as the CBN intensifies its efforts to stabilise the currency by supplying foreign exchange to the I & E (Investors and Exporters) window.

“Because of the country’s low oil production levels, high oil prices may have less of an impact on the country’s external reserves.

“A constant depletion of the external reserves is likely to discourage the CBN from supplying foreign exchange in the foreign exchange market. This could further stoke currency depreciation as demand outpaces supply.”