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The governor of the Central Bank of Nigeria Olayemi Cardoso has explained the depletion of the country’s foreign exchange reserves. 

The apex bank disclosed that contrary to what was initially reported, the sharp decline in Nigeria’s forex is not a result of defending the country’s currency, but paying debts. He made this known in Washington DC, at the ongoing International Monetary Fund/World Bank Spring Meetings.

According to the Punch newspaper, the central bank admitted that it wanted to be as sparsely involved in the money market as possible, hoping to create a system in which interested buyers and sellers interact to set prices. 

This idea would lay the groundwork for market forces to dictate prices rather than have the central bank directly influence them.

“I want to make this as clear as possible, it is not in our intention to defend the naira. and as much I have read in the recent few days, some opinions with respect to what is happening with our reserves and if the central bank is defending the naira,” the CBN governor said.

“Basically, what we are encouraging is for the market to be a willing-buyer and willing-seller price discovery system , and ultimately I perceive a future where the central bank would not intervene except in very unusual circumstances. What is important to us is that there is sufficient liquidity in the market,” he added.

Earlier reports revealed that foreign exchange reserves (forex) were depleted by over 2 billion in just a month. This raised concerns among the general public given that this was simultaneous with the recovery of the Nigerian currency.

The best possible guess as to why the anomaly had occurred was that the apex bank was cutting through its dollar holdings to maintain the Naira, despite having promised to allow the currency to float more freely. – Business Insider Africa