Financial analysts at EFG Hermes Holdings have said the reason behind Nigeria’s falling reserves is still not straightforward considering limited transparency of reserves and balance of payments numbers.
Indeed, the analysts highlighted four main factors that dictate the disappointing movement of reserves. In its latest report, titled ‘More pressure on NGN; adjustment edging closer’, EFG Hermes Holdings noted that Nigeria has been exporting less oil in the past year given its commitment to OPEC+ production cuts.
Speaking at a virtual meeting to launch the report, Managing Director – Head of Macroeconomic Analysis, EFG Hermes Holdings, Mohamed Abu Basha, said the first two factors explain why reserve build-up would have been dented while the remaining two are real drivers of the lack of reserve build-up. Besides, the report noted that Nigeria has been one of the exceptional countries where remittances have been negatively impacted by the pandemic.Remittances have dropped 33 per cent in the 12 months starting second quarter of 2020. The report stated that the country has been losing an average of $2billion a quarter over the past year .
Meanwhile, the analyst disclosed that the recently approved Special Drawing Rights allocation by the International Monetary Fund can stabilise exchange rate and drive down inflation in the country.
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