Continued foreign exchange instability in the country led the country’s external reserves to drop to 0.23 per cent or about $77.23m in December 2023.
According to figures obtained from the Central Bank of Nigeria, Nigeria’s external reserves were $32,89bn from $33.00bn in November 2023, with $32,17bn as the liquid portion, while $727,67mn is on lien as of December 28, 2023.
The recorded figures at the start of December 2023, the external reserves figure was $32,97bn, while $32,21bn was available for use, and $756,76mn.
Foreign exchange reserves are cash and other reserve assets, such as gold held by a central bank or other monetary authority, that are primarily available to balance the country’s payments, influence the foreign exchange rate of its currency, and maintain confidence in financial markets.
The country’s monetary policy managers must still grow and sustain foreign reserves.
Nigeria’s foreign reserves rose to about $47.37 billion on April 5, 2018, but had recorded a sustainable decline in the past five years.
On September 6, 2023, Fitch Ratings said, “Nigeria’s weaker net international reserve position emphasises the sovereign’s external vulnerabilities. Exchange-rate liberalisation and improvements in the overall monetary policy framework could strengthen the sovereign’s credit profile by easing foreign-currency supply constraints. Still, a recent loss of reform momentum and the constrained reserve position highlight the significant challenges such policy adjustments face.
“When we affirmed Nigeria’s rating at ‘B-’ with a Stable Outlook in May, we stated that external finances were a key rating sensitivity. We estimated that around 30% of Nigeria’s gross reserves (USD 37 billion at the end of 2022) comprised swaps with domestic banks. However, we considered that some other reserves could well be burdened.”
Meanwhile, through the CBN, the government had made efforts to stabilise the nation’s external reserves by boosting the foreign exchange supply in the system.
According to the Minister of Finance, Wale Edun, the country has an estimated $6.7 billion in overdue forward payments. He also stated that through the Central Bank of Nigeria, the Federal Government commenced payment of outstanding matured FX forwards owed to various creditors.