Nigeria’s foreign exchange (FX) reserves have maintained a one-month dip streak. The latest figures from the Central Bank of Nigeria (CBN) show the reserves reached a new low of $32.12 billion on April 17, 2024. The reserves dropped by $2.33 billion in 31 days, from $34.45 billion on March 18, 2024.
The reserves are now at their lowest level since September 20, 2017, when they were $32.08 billion. This marks the end of a growth period where the reserves had been rising. Between February 5 and March 18, 2024, the reserves increased by $1.28 billion.
Recommended reading: Nigeria’s FX reserves dip by over $2 billion in less than one month, hit lowest level in over six years
What You Should Know
- The CBN governor, Yemi Cardoso, said on Wednesday that the decreasing reserves were primarily due to debt repayments and other standard financial obligations, rather than efforts to defend the naira.
- He said this at the ongoing IMF/World Bank Spring meetings in Washington, noting that “The shift you see in our reserves has little or nothing to do with defending any naira and that is certainly not our objective.”
- Nigeria faces significant external debt service requirements, including payments on Eurobonds and other international financial obligations to multilateral and bilateral creditors. The repayments of these debts require substantial amounts of foreign currency, further draining the reserves.
- While there is yet to be fresh data for Q1 2024 on Nigeria’s external debt servicing, Nigeria spent about 50% of its dollar payments to service external debts between January and October 2023. Also, Nigeria’s expenditure on external debt servicing soared to $560 million in January 2024, marking a 339% hike compared to the previous year’s $112 million.
- The International Monetary Fund (IMF) recently projected that Nigeria’s foreign reserves are expected to see a significant reduction, falling to $24 billion in 2024. The IMF anticipates a challenging period through 2024–25 for Nigeria’s financial account, exacerbated by an absence of new Eurobond issuances, significant repayments of existing funds and Eurobonds totalling $3.5 billion, and continued portfolio outflows.
- However, Cardoso further disclosed that the reserve account had seen an influx of approximately $600 million recently, stressing that the movements in the country’s FX reserves were routine and not aimed at defending the naira.