Nigeria’s foreign reserves officially closed at $29.8 billion representing a 15.4% year on year drop. Nigeria’s reserves which is pivotal to defending the Nation’s currency, opened the year at $34.4 billion. Analysts believe the reserves is probably less than $20 billion if we net off currency swaps used by the CBN. Deposit Money Banks are also thought to have about $18 billion in their vaults owned by depositors. Most of the deposits are basically sterilized and depositors can only withdraw the amount in cash and are not allowed to transfer it except the original deposit was not via cash.
The balance in reserves may have been worse had it not been for the CBN’s introduction of the managed float policy back in February 2015. The policy placed restrictions on dollar transactions in Nigeria barring a list of 41 items from accessing the official window.
The CBN also restricted deposit and withdrawal of forex by depositors from commercial banks. The policy has largely had a mixed effect with the CBN claiming that the official exchange rate has been largely stable even though in reality the black market rate had risen to as high as N282 and access to forex by businesses and ordinary Nigerians have been nearly impossible.
