The Central Bank of Nigeria during its monetary policy committee briefing has revealed that the increase recorded in Nigeria’s external reserve was due to inflows from non-oil sources.
According to the apex bank, the external reserve increased by 1.61% ($620 million) to close the month of June 2022 at $39.22 billion from $38.6 billion recorded as of the end of the previous month.
Nigeria’s external reserve had been on a downtrend since the beginning of the year, losing a total of $2.04 billion between January and May 2022, however, the reserve level recorded a rear growth in the month of June.
The growth in the reserve level is following the policy programmes by the apex banks geared towards improving foreign inflows into the economy through increased export earnings and diaspora remittances.
- Recall that the Central Bank announced the launch of the RT200 FX Programme in February 2022, which is geared towards getting $200 billion in FX repatriation exclusively from non-oil exports over the next 3-5 years.
- In the same vein, the CBN in March 2021 introduced the “Naira 4 Dollar Scheme” for diaspora remittances, which offers recipients of diaspora remittances through CBN’s IMTOs to be paid N5 for every $1 received as remittance inflow.
What the MPC is saying
The MPC welcomed the Bank’s concerted efforts toward ensuring exchange rate stability, noting the current difficulties associated with managing the stream of external shocks impacting the economy.
- “The Committee also applauded the performance of the RT200 and similar initiatives targeted at improving accretion to reserves and stabilizing the exchange rate.”
- “The MPC noted that foreign exchange inflow through the RT200 FX Programme in Q1 and Q2, 2022, had increased substantially to approximately US$600 million as of June 2022.”
- “Members also noted the increase in Diaspora remittances as a result of the Naira for Dollar incentive and urged the Bank not to relent in its efforts to encourage foreign exchange inflow to the economy.”
Whilst the increase to $600 million is a welcomed development it is still far off the $200 billion target set by the CBN over 5 years assuming $40 billion per annum.
However, the increase in non-oil export will help boost the country’s external reserve and also serve as a war chest for the Central Bank to defend the local currency.
