Nigeria’s foreign exchange reserves have experienced a notable decline, decreasing by approximately $1.02 billion over an 18-day period as the Central Bank of Nigeria (CBN) intensifies efforts to safeguard the naira.*
As of March 18, 2024, the FX reserves stood at $34.45 billion. However, according to the latest data from the CBN, by April 3, they had fallen to $33.50 billion.
This recent decline contrasts with a previous upward trend, where the reserves witnessed a remarkable 43-day surge between February 5 and March 18, 2024, appreciating by $1.28 billion. The CBN attributed this rise to increased remittance payments from Nigerians abroad, heightened interest from foreign investors in local assets, and reforms in the foreign exchange market.
However, the reserves began to dwindle after reaching a peak of $34.45 billion on March 18. Subsequently, they gradually declined, reaching $34.39 billion on March 19, $33.57 billion by April 2, and finally $33.50 billion by April 3.
This rapid depletion of $1.02 billion within 18 days highlights the pressure on the reserve as efforts persist to stabilize the local currency.
The CBN has been actively intervening in the foreign exchange market to support the naira, which has faced pressure from various economic factors. These interventions often involve the sale of dollars to maintain market liquidity, a strategy that may have contributed to the decline in FX reserves.
During the reviewed period, the CBN made two significant announcements. First, it declared the complete clearance of the valid foreign exchange backlog. Second, it facilitated the sale of foreign exchange to Bureau De Change operators in Nigeria at an exchange rate of N1,251/$1.
Typically, Nigeria’s foreign exchange reserve reflects the country’s balance of payments and its ability to meet international obligations. A substantial decline in reserves can erode investor confidence and potentially lead to a credit rating downgrade, impacting the nation’s borrowing costs.
The International Monetary Fund (IMF) recently projected a significant reduction in Nigeria’s foreign reserves, estimating a decline to $24 billion by 2024. The IMF anticipates a challenging period for Nigeria’s financial account, driven by factors such as the absence of new Eurobond issuances, substantial repayments of existing funds and Eurobonds totaling $3.5 billion, and continued portfolio outflows.
