Nigeria's foreign exchange reserves dropped 2.17 percent month-on-month to $36.82 billion by June, 27, compared with $37.64 billion a month ago, after a Central Bank of Nigeria (CBN) intervention to support the naira, figures from the CBN said on Friday.
The reserves were back to the level they were on May 10, at $36.85 billion, but were higher than the $32.01 billion Africa's second biggest economy had in reserve a year ago.
The naira has fallen in the last three months due to an exit of offshore investors from the local debt market and strong demand for the dollar.
Dealers said the decline forex reserves was also due to the falling oil prices on the international market. Nigeria, Africa's top energy producer, depends on revenue from oil exports for 85 percent of its reserves. Meanwhile, Nigerian interbank rates eased on budget cash inflow last week to an average of 15.16 percent, from 15.83 percent a fortnight ago, after the disbursal of budgetary allocations to government agencies on Wednesday.
Nigeria distributes money from oil revenue to its three tiers of government from a centrally held account, which provides liquidity for the banking sector and eases the cost of borrowing among banks.
Dealers said however that rates remain high due to some large outflows from the system during the week.
"The market was short before the release of the budget allocations because the central bank had been selling dollars directly to banks to support the naira," one dealer said.
Traders said Nigerian National Petroleum Corporation (NNPC) recalled a large amount of cash from the system in the week, while bonds and treasury bills purchases also impacted negatively on market liquidity. NNPC, a major dollar supplier to the interbank market, sold an additional $500 million to some lenders on Monday and recalled its naira proceeds to its account with the central bank.
"The market opened with a cash balance of about 21 billion naira on Friday, but we expect that the level will drop next week because of funding for foreign exchange purchases," another dealer said.
The secured Open Buy Back (OBB) eased to 14.50 percent compared to 15 percent last week, 2.5 percentage points above the central bank's 12 percent benchmark rate, and 4.5 percentage points above the Standing Deposit Facility (SDF) rate.
Overnight placement and call money dropped to 15.50 percent each, from 16.50 percent and 16 percent each last week.
Traders expected rates would inch up next week as liquidity drops and more funds leave the market for foreign purchases.