13 January 2009
Lagos — The Central Bank of Nigeria,CBN, yesterday attributed the decline in the nation's foreign reserves to the rise in the demand for foreign exchange in the market.
The Director of Corporate Affairs of the CBN, Mr Festus Odoko, told the News Agency of Nigeria (NAN) in Abuja that the reserve was a function of the market situation of any country.
According to him, the decline was not as a result of the present global credit crisis as being expressed in some quarters.
Nigeria's foreign reserves which rose to $67 billion by the middle of 2008 dropped to $53 billion by December 2008.
"Reserve is not money kept in store, rather it is the money available for foreign exchange, so it can change depending on the inflows and the outflows.
"When the inflow is higher than the outflow, the reserve will go up, but when the outflow is higher than the inflow, the reserve will drop," Odoko said.
Odoko said there had been a steady increase in the demand for foreign exchange, adding that the nation's reserve was sufficient to meet the demands.
He said there was need to expand the sources of foreign earnings instead of concentrating on the reserve built from the oil revenues.
"Our focus now should be on what we can do to increase our earnings in a country that has one major source of revenue. In some countries, they reduce importation of some products," he said.
Odoko said the CBN decided to devalue the naira so as to protect the economy against possible shocks.
"It is either we reduce importation since the price level of the crude oil is falling or we devalue the currency to ensure a balance," he added.
The Naira appreciated steadily against the dollar for most of last year, reaching an exchange rate of N116 to a dollar, but the recent figures on the CBN website indicate that the dollar now sells for N144.
The CBN spokesman explained that the devaluation would check some of the excesses of importation, thereby putting the economy on a better footing.
The CBN Governor, Prof. Chukwuma Soludo, had recently said that the devaluation of naira was a deliberate policy of the apex bank to secure the economy.
Soludo, however, warned that speculators in foreign exchange might lose money as the apex bank had enough foreign exchange to meet the growing demand.
Idoko also said that no bank in the country had been given financial assistance by the CBN to withstand the effects of the current global meltdown.
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