Nigeria is currently facing on the its most challenging reserve management crisis in half a decade as the fall in crude oil prices precipitates a run on our dollar reserves like never seen. The reserve is under pressure from our oil revenue is under threat from the declining oil price and at the same time also having to cater for a huge surge in the demand for forex. This has now taken our forex reserves to a six months low of $36,442,811,238,000 ($36.4billion. )
In fact, just a year ago December 6, 2013 Nigeria had about $44,621,208,255,000 ($44.6billion) in Forex reserves according to data from the CBN. So, essentially we have now lost about $8.2billion year to date. In case you are wondering how it affects you, a further and perhaps drastic drop in the forex reserves may force the CBN to stop defending the naira and probably allow the naira float freely to the forces of demand and supply. This option will at least save the CBN some forex positions but the consequences on the economy will be too much to bear. Inflation rate will spike, prices of goods and services will rise considerably and there might just be a scary spate of social unrest. Let’s hope this never happens.