Nigeria’s externals reserve rose by $5.15 billion in 2021 to close at $40.52 billion as of 31st December 2021, representing a 14.5% rise compared to $35.37 billion recorded as of the end of the previous year.
This is according to data obtained from the daily tracker of the Central Bank of Nigeria (CBN).
The gain recorded in the country’s reserve level is majorly attributed to the $4 billion Eurobond, secured by the federal government in September, which saw the reserve surpass $41 billion in October 2021.
Nigeria also secured a $3.35 billion IMF facility under the Special Drawing Rights in the review year, which also served as a boost for the reserves. The external reserve has been a major buffer for the Central Bank in defending the country’s exchange rate, by intervening in the official Investors and Exporters window.
Notably, over $32 billion in FX exchanged hands in the review year, largely due to the Central Bank’s significant intervention into the market, after placing a ban on the sales of FX to BDC operators in the country.
The nation’s foreign reserve had gained $5.99 billion in October, however, in November, the reserve lost $611.01 million in value as against the previous month gain and a $2.76 million gain in September 2021. In December 2021, the reserve dipped by $66.17 million, putting the annual gain at $5.15 billion.
Nigeria’s reserve has declined in recent months as the Central Bank continue to intervene in the official forex market in order to stabilise the local currency. Especially, at a time when naira is highly volatile at the black market.
What you should know about external reserves
Foreign reserves are assets held on reserve by the central bank of a country used to back liabilities and influence monetary policy. They include foreign banknotes, deposits, bonds, treasury bills and other foreign government securities.
These assets serve many purposes but are most significantly held to ensure that a government or its agency has backup funds if their national currency rapidly devalues. Foreign exchange reserves are also called international or external reserves.