Nigeria’s apex bank, the Central Bank of Nigeria has disclosed that the country’s foreign exchange, FX reserve has reached a high of $34.7bn having increased consistently over the past week.
According to the CBN who made this known via its website on Sunday, the new mark represents a $110m increase from the previous day’s figure of $34.5bn with a total gain of $316m since July 1.
Following the disclosure, a recent update by Fitch Ratings has seen Nigeria’s economic outlook placed on the positive side while citing significant reforms that have restored macroeconomic stability and enhanced policy coherence and credibility.
According to Fitch, “the positive outlook partly reflects reforms over the last year, which have reduced distortions stemming from previous unconventional monetary and exchange rate policies.”
However, Fitch opines that short-term challenges remain, including high inflation and FX market volatility. It states that despite this, the agency expects further monetary policy tightening and strengthening of monetary policy transmission.
It says, “the reforms have contributed to the restoration of macroeconomic stability and enhanced policy coherence and credibility.
“However, we see significant short-term challenges, notably high inflation, and the FX market has yet to stabilize, and the durability of the commitment to reform is to be tested.”
Remarkably, this comes amidst the recent increase in oil prices, improved diaspora remittances and the Central Bank’s efforts to stabilise the currency. These factors have likewise been credited as some of the major contributory factors responsible for the significant growth witnessed in the country’s FX reserve.
Moreover, the increase in Nigeria’s foreign exchange reserves is perceived by experts who have shared their opinions with newsmen as a positive development for Nigeria’s economy.
According to these experts, the increase provides a cushion against external shocks and supports the country’s ability to meet its financial obligations.
On its part, the Central Bank has implemented various measures to manage the foreign exchange market, including the introduction of the Investors’ and Exporters’ window, which has helped to attract foreign investment and boost reserves.
These reforms have reportedly led to a return of sizeable inflows to the official foreign exchange market and a significant rise in foreign portfolio investment inflows, according to reports.
Xclusiveloaded News had previously reported that as of June 6, 2024, Nigeria’s foreign exchange (FX) reserve stood at $32.80bn, following a consistent pattern of upward trajectory witnessed for six consecutive days.
This trajectory had indicated a recovery process for the economy’s external reserve which grew slowly but steadily within those preceding six days by $110m from the previous record which stood at $32.69bn as of May 31 after suffering a significant decline of $1.8bn for 10-weeks.
Recall that Fitch ratings had in June, also projected that the Nigerian naira will end the year at 1,450 to the United States of American dollar.
Director Sovereigns at Fitch Ratings, Gaimin Nonyane, made the prediction during a recent post-sovereign rating webinar which focused on Nigeria and Egypt.
According to Nonyane, “the Naira is still finding its feet. It is still in price discovery mode. So we would expect a lot of volatility in the near term. However, as I just mentioned, there is the expectation of multilateral donor funding coming in Q3 this year in addition to improved oil receipts. So that should help to reduce volatility somewhat by Q3 this year.”
