Nigeria’s foreign exchange (forex) reserves have surged to their highest level since March 28, 2024, marking a significant financial milestone that coincides with the longest period of stable exchange rate seen in over a year.
This is as the country recorded a string of financial commitments from the World Bank through new multilateral loans.
According to the latest data published by the Central Bank of Nigeria (CBN), the reserves now stand at $33.58 billion as of June 19, 2024.
This achievement represents a notable recovery since the end of March 2024 when it was as high as $33.83 billion before a period of decline set in.
The rise in forex reserves comes after three months of noticeable fluctuations when it plunged to a low of $32.11 billion on April 19, 2024, sparking concerns about the nation’s financial stability.
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Recall, in April the central bank Governor had to address the issue at the last IMF Spring meeting.
However, since then, a gradual and consistent upward trajectory has been observed, coinciding with a period of exchange rate stability. The official exchange rate has averaged N1,481/$1 this month and has depreciated or appreciated within a band of plus or minus 0.06%.
What the data is saying
According to data from the Central Bank of Nigeria, forex reserves have risen by 5% or $1.47 billion In the last two months.
- The CBN data show that the forex reserves rose from $32.11 billion on April 19, 2024, to $33.58 billion by June 19, 2024.
- This growth represents a substantial boost for the country’s external reserves, as the apex bank continues to implement policies that attract forex liquidity.
- However, critics will point to a much-improved liquidity position considering the plethora of policies implemented by the central bank over the last year as well as several promises of potential forex inflow from foreign portfolio investors.
Nairametrics research also observed improved liquidity in the forex turnover with the average turnover for June to date at $199 million daily compared to $168 million in the same period in May. Total forex turnover in June is now $2.1 billion of trading in 11 days of trading.
What you should know
The Monetary Policy Committee (MPC) recently urged the CBN to focus on boosting the external reserves.
A part of the Monetary Policy Communique released at the end of its 295th meeting read:
“The Committee also noted the marginal increase in the external reserve balance between March and April 2024 and urged the Bank to sustain its focus on accretion to reserves.”
To ensure a steady flow of foreign exchange into the country, the CBN plans to double the diaspora remittance inflow this year.
In addition, Afrexim Bank earlier announced the disbursement of $925 million- another tranche of the $3.3 billion crude oil-backed loan agreement it entered into with the NNPC last year. The bank disclosed this in a statement on its website stating that the current disbursement brings the total payment for the facility to $3.175 billion.
This loan is expected to help stabilize the forex market in light of the severe volatility.
The World Bank also recently approved $2.25 billion in loans to Nigeria to boost the country’s economic stability and support its vulnerable populations. This financial infusion is intended to provide immediate financial and technical support for Nigeria’s urgent economic stabilization efforts.
