New information from the Central Bank of Nigeria has shown that Nigeria’s foreign reserve has increased to $35.05bn. The data on the apex bank’s website indicates that the current reserve level is reflective of the early period of President Bola Tinubu’s administration, during which the reserves consistently remained above $35bn. According to the data, Nigeria had not passed the $35bn mark in external reserves since June 2, 2023, during the Tinubu administration, with the amount standing at $35.02bn.
Tinubu’s inauguration marked the beginning of a new era with reserves totalling $35.09bn. However, since then, the reserves have been unable to surpass the $35bn mark. The Naira has also faced challenges, especially after being officially floated on June 14 as part of the CBN’s efforts to unify segments of the currency market. According to a recent report, the local currency has depreciated by about 70 percent against the US Dollar following the alignment of market segments.
Many actions have been taken to improve the country’s reserve.
During Tinubu’s initial year as leader, the foreign reserves consistently hovered around $32-34 billion. However, on April 19, there was a noticeable drop in Nigeria’s foreign reserves to $32.11 billion. This led to rumours that the Central Bank of Nigeria was taking action in the currency market to protect the naira. Yet, during the recent IMF Spring conference, central bank governor Dr. Olayemi Cardoso refuted these allegations. In light of recent readings, he expressed that certain perspectives on the reserve situation and the central bank’s efforts to support the naira appear contradictory to their established policy and philosophy.
Their goal is to promote open market transactions between buyers and sellers, allowing prices to be determined naturally. He envisions a future where central banks will rarely need to intervene, only in extremely rare cases. The key focus for them is ensuring there is enough liquidity in the market, as discussed, and they will strive to maintain that. Given the lively nature of the currency market, there seems to be no necessity for them to step in and intervene.
Stability of the economy heavily relies on its reserves.
Also, Nigeria’s external reserves have seen a significant increase of $2.98bn since hitting a low point on April 19, reaching record levels. The Monetary Policy Committee of the CBN is focusing on enhancing liquidity in the foreign exchange market, as highlighted in the individual remarks of the members during the 295th committee meeting in May, which have been newly released on the CBN website. During the meeting, the members decided to increase the MPR to 26.25 per cent while keeping all other policy parameters unchanged.
Similarly, Nigeria’s Economy stability heavily relies on its reserves, acting as a shield against sudden economic disruptions and instilling trust in both Investors and global Trade partners. However, these reserves have historically not been stable due to factors such as oil prices, government decisions, and global economic circumstances. During times of soaring oil prices, Nigeria’s reserves have experienced notable increases. In the year 2008, Nigeria experienced a period of Economic Growth due to the global oil boom, resulting in foreign reserves reaching approximately $62 billion.
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This surplus enabled the government to execute numerous developmental initiatives and social Welfare programs. Ensuring a strong supply is crucial for a country’s economic stability. These are essential for meeting global financial commitments, supporting the country’s currency value, and providing a safety net during economic challenges. Additionally, they can boost the country’s credit rating, resulting in better terms for borrowing money internationally. As a result, managing foreign reserves has been consistently emphasized by various governments as a key economic tactic.