12 January 2009
The Central Bank of Nigeria (CBN) yesterday said that the decline in the nation's foreign reserves was due to the rise in the demand for foreign exchange in the market.
The Director of Corporate Affairs of the CBN, Mr Festus Odoko, said in Abuja that the reserves was a function of the market situation of any country.
He said that the decline was not as a result of the present global credit crisis as being expressed in some quarters.
The country'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 that 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 that 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 that 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.
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.
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