As of September 29, 2022, Nigeria’s foreign reserves were $38.318 billion, down from $40.520 billion as of December 31, 2021, a $2.202 billion decrease. This represents a decline in foreign reserves of 5.42%.
Nigeria’s foreign exchange reserves have been reduced by billions of dollars despite increased oil prices this year. The nation’s reserves decreased last month by $706 million, from $39.024 billion on September 1, 2022.
In addition, there is a lack of foreign exchange, which is causing the local currency to depreciate even further on the FX market as currency traders continue to complain about the lack of forex liquidity. Despite the central bank’s intervention in the currency market, there is currently a forex crisis.
Nonetheless, the exchange rate at the official window has been relatively stable but mostly inaccessible to most Nigerians. The exchange rate at the investors and exporters window trades around N437.03/$1, while the Black market rate is around N735/$ at the time of writing.
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The apex bank would continue its intervention policy with the hope that the oil price surge would boost the reserves. This was revealed by the CBN governor, Godwin Emefiele, as he briefed the media following the end of the monetary policy committee meeting.
He said “the Committee noted the marginal increase of 0.39% in the level of external reserves to US$38.46 billion at end-August 2022 from US$38.31 billion at end-July 2022 despite continued demand pressure. With crude oil price forecast to continue to moderate in the short to medium term, Members urged the Bank not to relent on the various policies put in place to support non-oil exports to shore up external reserves.”
According to the Financial Times, the Opec+ oil coalition is considering a significant drop in production to support plummeting prices as the group prepares to meet in person for the first time since March 2020.
Brent, the international oil benchmark, surged 3% to $87.67 per barrel amid news that the producer group was considering curtailing production. The contract is still significantly below the high of $130/b reached earlier this year in the aftermath of the Russian invasion of Ukraine. Nonetheless, Nigeria’s central bank is counting on rising oil prices to enhance its reserves.
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Foreign reserves are assets maintained on reserve by a monetary authority in foreign currencies, according to the Central Bank of Nigeria. These reserves are utilized to sway monetary policy decisions. Foreign currencies, deposits, treasury bills, deposits, and other government securities fall into this category.
The International Monetary Fund (IMF) asserts that international reserves are those external assets that are available to and are controlled by a country’s monetary authorities.
Nigeria’s external reserve is very important in defending the naira and is used to cover the country’s huge import bills. An increasing external reserve suggests a higher inflow from crude oil earnings, inflow from foreign investors, and external loans.
