Nairametrics’ analysis of central bank data on external reserves indicates that Nigeria’s reserves have risen once more, to $35.05 billion as of July 8, 2024.
As of May 30, 2023, when it was $35.09 billion, or roughly 14 days before the foreign exchange (FX) unification policy was introduced in June 2023, it was observed that the reserves had reached their highest point. During the Bola Tinubu government, this is the first time it has surpassed the $35 billion cap.
It appears that the recent FX policies of the Central Bank of Nigeria (CBN) coupled with a string of financial pledges from the likes of Afrexim Bank and the World Bank through loans have strengthened the rise of the reserves.
When Bola Tinubu was inaugurated in as the 16th president of Nigeria on May 29, 2023, the country’s external reserves were roughly $35.09 billion.
Nevertheless, Nigeria’s foreign reserves had fallen to $34.66 billion when the CBN revealed the FX unification strategy. The reserves were in the $33 billion range from July to December 2023.
The reserves this year fluctuated noticeably for three months before hitting a low of $32.11 billion on April 19, 2024.
At the recent IMF Spring Meeting, the Governor of the central bank had to address the issue of the decline, stating that efforts to defend the naira were not the primary cause of the declining reserves, but rather the repayment of debt and other standard financial obligations. Since then, however, a gradual and consistent upward trajectory has been observed, coinciding with a period of exchange rate stability.
Nigeria’s exchange rate has been rising over the past few weeks, closing June at more over $34 billion for the first time since April. The reserves kept rising in July, reaching a number of highs that have now resulted in the largest reserve in the previous year.
In less than three months, the external reserves have increased by $2.94 billion from their lowest point of $32.11 billion under Tinubu in April.
The CBN was recently advised by the Monetary Policy Committee (MPC) to concentrate on increasing the external reserves. The CBN intends to quadruple the inflow of diaspora remittances this year in order to guarantee a consistent supply of foreign currency into the nation.
Additionally, Afrexim Bank previously declared the release of an additional $925 million, which represents a tranche of the $3.3 billion credit arrangement it signed with the NNPC last year and guaranteed by crude oil. The bank made this information public in a post on its website, noting that the facility has now received $3.175 billion in payments. Given the extreme volatility, it is anticipated that this loan will aid in helping to stabilize the FX market.
In order to strengthen Nigeria’s economic stability and assist its most vulnerable citizens, the World Bank has also just granted loans totaling $2.25 billion for the nation. Nigeria’s urgent efforts to stabilize its economy are expected to receive immediate financial and technical support from this inflow of funds.
Fitch stated that notwithstanding the rise in reserves and financial obligations to Nigeria, the country’s sovereign credit profile is still severely hampered by the uncertainty surrounding the exact quantity and makeup of Nigeria’s foreign exchange reserves.
