Nigeria’s external reserves have declined by 0.68 percent to $36.620 billion as of August 12, 2024, down from $36.872 billion recorded on August 7, 2024, according to data from the Central Bank of Nigeria (CBN).
This drop follows a recent increase, where reserves rose to $37.88 billion on July 15, 2024, from $34.76 billion at the end of June 2024.
In its July report, “Macroeconomic Outlook: Price Discovery for Economic Stabilisation,” the CBN had predicted a slight reduction in external reserves for 2024, attributing the expected decline to debt servicing and other financial obligations. The report noted, “The external reserves, which stood at $33.09 billion in 2023, could reduce slightly in 2024. This is due to continued payments of outstanding foreign exchange forward obligations, matured foreign exchange swaps, and debt service. However, the anticipated improvement in crude oil earnings, along with recent reforms in the foreign exchange market and energy sector, would help cushion the drop.”
Nigeria’s foreign reserves crossed the $35 billion mark on July 8, 2024, for the first time in about a year and have remained above that threshold since.
Bala Moh’d Bello, a member of the Monetary Policy Committee (MPC), emphasized the importance of maintaining exchange rate stability during the committee’s July 2024 meeting. He stated, “The central bank has made substantial efforts to stabilize the foreign exchange market, leading to increased foreign portfolio investment inflows and reduced exchange rate volatility. In addition to current measures, medium and long-term strategies are being explored to ensure that the exchange rate settles at a market-determined equilibrium level.”
External reserves, held by the CBN in foreign currencies, include assets such as U.S. dollars, bonds, Treasury bills, foreign government securities, and commodities like gold. These reserves are crucial for influencing monetary policy, supporting the national currency, meeting external obligations, managing exchange rates, and fostering confidence in the Nigerian economy. They also play a vital role in facilitating international trade and ensuring economic stability.
Lydia Shehu Jafiya, another MPC member, highlighted in her statement that foreign exchange inflows improved by 38.26 percent between April and May 2024, driven by increased oil and non-oil receipts. She noted that the gross external reserve position at the end of June 2024 could provide 7.59 months of import cover for goods and services and 10.88 months for goods alone. She also pointed out the relative stability and convergence of rates in the foreign exchange market.
However, Mustapha Akinkunmi, an MPC member, noted that the naira depreciated to ₦1,605.50 on July 19, 2024, from ₦1,525.00 on June 28, 2024. He stated that the gross external reserve stood at $34.88 billion as of June 2024, with a projection of about $32.93 billion by the end of May 2024, which could cover about 11 months of imports for goods and around 8 months for goods and services.
An update obtained by Channels Television on Wednesday confirmed the decline to $36.620 billion as of August 12, 2024, from $36.872 billion recorded on August 7, 2024.
CBN Governor Olayemi Cardoso, commenting on potential solutions to the deepening situation, stressed the importance of monitoring developments in the foreign exchange markets, given their significant impact on inflation. He attributed the recent stability in the exchange rate to increased market confidence in the actions of the MPC to achieve its inflation-targeting objectives. Cardoso warned, “This fragile equilibrium must be carefully managed to avoid jeopardizing the progress made in attracting more capital flows, which are essential for sustaining the recent stability in the market.”
