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What constitutes Nigeria’s external reserves?

Anytime we hear about foreign reserves, we just learn about the movement in the reserves, whether upwards or downwards. But there is more to the concept. Let’s show you.



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Anytime we hear about foreign reserves, we just learn about the movement in the reserves, whether upwards or downwards. Most people do not understand the composition of a country’s foreign reserves and just assume it is made up of hard cash stored somewhere.

According to the Central Bank of Nigeria, foreign reserves are assets held on reserve by a monetary authority in foreign currencies. These reserves are used to back up liabilities and influence monetary policies. They include foreign banknotes, deposits, bonds, treasury bills, and other government securities.

The International Monetary Fund (IMF) states that international reserves are those external assets that are readily available to and are controlled by a country’s monetary authorities. They comprise foreign currencies, other assets denominated in foreign currencies, gold reserves, special drawing rights (SDRs) and IMF reserve positions.

READ MORE: Nigeria’s External Reserves drop by $2.9 billion, hit 10-month low

Why does a country have foreign reserves?

These reserves may be used for direct financing of international payments imbalances or for indirect regulation of the magnitude of such imbalances via intervention in foreign exchange markets in order to affect the exchange rate of the country’s currency.

In essence, foreign reserves give the government the confidence and resilience to withstand shocks if a country’s currency crashes or devalues. 

What are Nigeria’s external reserves composed of?

The CBN Act of 2007 provides that the apex bank shall maintain a reserve of external assets consisting of all or any of the following:

  • Old coin or bullion;
  • Balance at banks outside Nigeria where the currency is freely convertible and in such currency, notes, coins, money at call, and any bill of exchange bearing at least two valid and authorized signatures and having maturity not exceeding ninety days; exclusive of days of grace;
  • Treasury bills (with a maturity period not exceeding one year) issued by the government of any country outside Nigeria whose currency is freely convertible;
  • Securities of, or guarantees by, a government of any country outside Nigeria whose currency is freely convertible, provided such securities shall mature in a period not exceeding ten years from the date of acquisition and are of such investment grade as may be determined by the Board from time to time;
  • Securities of, or guarantees by international financial institutions if such securities are expressed in currency freely convertible, in the form of investment-grade assets as may be determined by the Board and maturity of the securities shall not exceed five years;
  • Nigeria’s Gold Tranche in the International Monetary Fund (IMF);
  • Allocation of Special Drawing Rights (SDR) made to Nigeria by the IMF; and
  • Investment by way of loans or debenture in an investment bank or development financial institutions within or outside Nigeria for a maximum period of five years.

READ ALSO: IMF ranks Nigeria’s sovereign wealth fund second-worst in the world


The conditions for such investment are that:

  • The amount invested should not more than 5% of the total reserves;
  • The reserve level at the time should be able to sustain twenty-four months of import; and
  • The loan or debenture is in foreign currency.

Nigeria’s external reserves as of the time of publishing this article stood at $34.673 billion.

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Business News

Financial Autonomy: Governors, State Speakers reach agreement

The Governor also said that the final document of the agreement should be ready for implementation by May 2021.



The Governors’ Forum, Conference of Speakers of State Legislature and other governance stakeholders announced that they reached a resolution over the implementation of financial autonomy for State Legislature and Judiciary.

This was disclosed by the Ekiti State Governor and Chairman Nigeria Governors’ Forum, Kayode Fayemi, after the meeting, which was held in Abuja on Monday, and presided by the Chief of Staff to the President, Prof. Ibrahim Gambari.

What the Governor said

“We are here for legislative and judicial autonomy and Governors; Speakers of State Assemblies and the Judges of the States are on the same page as far as this issue is concerned,” he said.

We just emerged from a meeting with the Solicitor General of the Federation, the representatives of the judiciary and those of the Conference of Speakers and we are all in force; an agreement has been reached.

READ: Finance Minister tasks FG and state governments to control spending

The issue is about implementation. There has been no objection from governors on judicial and legislative autonomy.

As a matter of fact, it would not have passed if governors were not in support in the first instance. So, that issue has been fully and holistically addressed,” Fayemi said.

The Governor also said that the final document of the agreement should be ready for implementation by May 2021 and urged striking workers  to return  to offices “because as far as this has gone, we have met with all the parties concerned and the President, through his Chief of Staff, has been monitoring what has been happening.”

What you should know

Nairametrics reported earlier this month that members of the Judiciary Staff Union of Nigeria (JUSUN) went on strike with the closure of Federal High Courts in different states across the nation. The union said the purpose of the strike was to draw attention to the financial autonomy of Nigeria’s Judiciary.

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Finance Minister tasks FG and state governments to control spending

The Minister also denied claims that the FG printed N60 billion as top-up for March FAAC numbers.



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The Minister of Finance, Zainab Ahmed, has called on Governments on all levels in Nigeria to control spending amid decreasing revenues and urged for prudent government spending. The Minister also denied claims that the Federal Government printed N60 billion as top-up for March FAAC numbers.

The Minister disclosed this in an interview on Monday and warned that the FG was not generating enough revenue to align with its spending habit.

READ: UK to return £4.2million seized from Ibori to Nigeria

Zainab Ahmed added that the FG would maintain its stance from January 2021 to end total fuel subsidies in Nigeria, and confirmed talks with organised labour on subsidy removal.

“As a nation, the Federal, State and Local governments must review expenditure patterns. We are spending too much and we are not generating enough,” she said.

READ: Resolving the global debt and liquidity crises, issues and possible solutions

What you should know 

Nairametrics reported last month that the Debt Management Office had announced that Nigeria’s public debt at end of 2020 was N32.915 trillion. The DMO said the sum of the debt included the Debt Stock of the Federal and State Governments, as well as the Federal Capital Territory.

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