Nigeria’s External Reserves Plummet by $1.8bn in 10 Weeks.
Nigeria’s foreign exchange reserves have declined by $1.8 billion in the past 10 weeks, according to recent data from the Central Bank of Nigeria (CBN). As of May 29, 2024, the country’s FX reserves stood at $32.69 billion, a drop from $34.44 billion recorded on March 18. This marks a significant decrease from the $36.1 billion recorded in May 2023 and a total reduction of $3.4 billion since February 2024.
Experts attribute the decline in FX reserves to multiple factors, including debt repayment, a sharp decrease in oil exports, reduced foreign investment, and an increase in imports. Debt repayments reported by the CBN showed a reduction from $560 million in January 2024 to $276.16 million by March 2024, indicating that the bank has likely been servicing foreign debts from the reserves.
The naira’s performance has also been affected, weakening by 5.60% in May despite a surge in dollar supply amounting to $4.60 billion in the official foreign exchange market. The FX market closed the month with the naira trading at N1,485.99 per dollar, down from N1,402.67 at the beginning of the month, according to the FMDQ Securities Exchange Limited.
CBN Governor Olayemi Cardoso provided insights into the decline, explaining that shifts in reserves are normal when debts are due and payments are made to maintain credibility. He assured that the reserves would see improvements in the coming days.
Nigeria’s economy heavily relies on oil exports, which contribute over 90% of its foreign exchange earnings. The decline in FX reserves has exacerbated the naira’s struggle against the US dollar, with the currency losing over 100% of its value since the beginning of 2024, making it one of Africa’s worst-performing currencies.
Financial experts have raised concerns about Nigeria’s ability to meet its foreign debt obligations and finance imports due to the falling FX reserves. The CBN has been intervening in the foreign exchange market to stabilize the naira and boost investor confidence. However, the ongoing decline in reserves highlights the need for the government to diversify the economy and reduce its reliance on oil exports.
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“The decline in FX reserves is a clear indication that Nigeria’s economic challenges are far from over,” an expert noted, urging the government to address the fall in oil exports, attract foreign investment, and diversify the economy to prevent further declines in the FX reserves.
Despite the challenges, the naira began trading positively on Monday, appreciating to N1,476 per dollar, a 0.61% increase from the previous Friday’s rate of N1,485.99. The daily market summary from FMDQ showed an intraday high of N1,500 per dollar, down from N1,550, while the intraday low weakened to N1,250/$1 from N1,174.88/$1 quoted the previous Friday. The dollar supply by willing buyers and sellers amounted to $121.87 million.
