Nigeria’s external reserves had shown an unstable trend in the first month of 2023 following weak foreign investment flows and reduced accretion from crude oil sales. This has caused a significant decrease in the country’s foreign exchange reserves as well as a weakening of its currency, the naira.
The decline in Nigeria’s external reserves was most evident at the end of January, when it dropped 0.35 percent to $37.069 billion from $37.082 billion recorded at the end of December last year, according to data obtained from CBN’s official website.
In the first two weeks of January 2023, the foreign reserve increased to $37.210 billion, indicating an increase of 0.34 percent from the $37.082 billion recorded on December 30, 2022, but the foreign reserve started to decrease in the last two weeks of January 2023, amounting to a marginal decrease of 0.38 percent.
The decline is mainly attributed to lower inflows from export proceeds and remittances by Nigerians abroad, which are usually used for importation purposes. In addition, there have been reports that due to low global demand for Nigeria’s main exports, such as oil and gas, there has been a drop in prices, leading to further depletion of their foreign reserve earnings.
The government is taking steps towards mitigating this issue by implementing various measures, including diversifying its economy away from relying solely on crude oil production; encouraging local manufacturing through incentives; reducing unnecessary imports; providing access to finance for small businesses; and improving infrastructure development projects, among other initiatives, to increase the economic growth rate while also ensuring sustainability within certain sectors like agriculture or the technology services sector, which can help increase employment opportunities and thus boost income levels across all social classes.
Ratecaptain’s economist and analyst also suggest that international partners, both in the public and private sectors, could be beneficial given that they would provide access to not only capital but also expertise, which will enable Nigerian firms to become more competitive globally. These issues can be effectively addressed with the appropriate policies, thereby creating conditions conducive to investors feeling comfortable investing in Nigerian markets without fear or doubt about the returns on their investments.
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