Nigeria’s foreign exchange (FX) reserves have undergone a notable decline of approximately $1.02 billion over an 18-day period, as the Central Bank of Nigeria (CBN) maintains its assertive stance in safeguarding the naira.As of April 4, 2024, the FX reserves stood at $33.43 billion, marking a decrease from $34.45 billion recorded on March 18, 2024, as per the latest data from the CBN. This reduction represents the lowest level reached since February 20, 2024, when the reserves were reported at $33.42 billion. The recent downturn signifies a departure from the prior trend of steady accumulation, which saw the reserves surge for 43 consecutive days, adding $1.28 billion between February 5 and March 18, 2024. The CBN attributed this surge to heightened remittance inflows from Nigerians abroad, increased foreign investor interest in local assets, particularly government debt securities, and reforms in the foreign exchange market alongside an uptick in oil production.The downward trajectory reflects a substantial drawdown in reserves, commencing from the peak of $34.45 billion on March 18, 2024. The reserves witnessed a continuous decline, reaching $34.39 billion on March 19, further slipping to $33.57 billion by April 2, and ultimately settling at $33.43 billion by April 4. This notable decrease of $1.02 billion within the aforementioned 18-day timeframe underscores the strain on reserves amidst ongoing endeavors to stabilize the domestic currency.CBN’s interventions in the FX market have been proactive, aimed at bolstering the naira amidst diverse economic pressures. These interventions often entail the sale of dollars to ensure adequate liquidity, a strategy that likely contributed to the reduction in FX reserves.During the reviewed period, the CBN announced the complete clearance of valid foreign exchange backlogs and the sale of $10,000 foreign exchange to each Bureau De Change operator (BDC) in Nigeria at a rate of N1,251/$1.It is imperative to recognize that the depletion of FX reserves raises concerns regarding the country’s balance of payments and its ability to fulfill international commitments. A substantial decline can erode investor confidence and potentially lead to a downgrade in credit ratings, amplifying borrowing costs. Nigeria grapples with various economic hurdles, including losses in the oil and gas sector, historically a significant source of FX. Diminished reserves may curtail the CBN’s capacity to intervene in the currency market, possibly exacerbating naira depreciation.The International Monetary Fund (IMF) projects a notable reduction in Nigeria’s foreign reserves, foreseeing a decline to $24 billion in 2024. This prognosis underscores a challenging period for Nigeria’s financial account through 2024–25, accentuated by limited new Eurobond issuances, substantial repayments totaling $3.5 billion, ongoing portfolio outflows, and the absence of significant portfolio inflows. However, the IMF anticipates a prospective recovery to $38 billion by 2028, driven by forecasted portfolio inflow increments.Policy makers face the task of balancing short-term currency stabilization measures with long-term economic strategies to ensure Nigeria’s financial resilience and stability on the global front.
