ABUJA (Sundiata Post) – So far this year, Nigeria’s external reserves have appreciated by $3.02 billion amid numerous foreign exchange interventions to strengthen the local currency.
The Central Bank of Nigeria (CBN) recently approved the sales of foreign exchanges to eligible Bureau De Change (BDCs) to meet the demand for invisible transactions as the apex bank takes a decisive step to strengthen the naira.
Data from the CBN shows that external reserves that opened in 2024 at $32.91 billion increased by $3.02 billion to close at $35.93 billion as of June 18, 2024, the highest since 2023.
Foreign reserves, also known as foreign exchange reserves, are assets by a country’s central bank in foreign currencies.
In a circular signed by A. A Mahdi, the Acting Director, Trade and Exchange at the CBN, the bank announced that the $35.93 billion as of June 18, 2024, is the highest since February 2023 when Nigeria’s external exchange buffer crossed the $36 billion mark.
According to analysts at Cordros Research, Nigeria’s foreign exchange reserves hit its highest level in 16 months, as the gross reserve level increased by $557.70 million week-on-week to $35.93 billion, attributable to the disbursement of the first tranche ($750.00 million) of the Development Policy Financing from the World bank.
The Federal Government stated that it obtained $751.88 million out of the recently approved $1.5 billion loan by the World Bank. The loan under the Nigeria Reforms for Economic Stabilisation to Enable Transformation, Development Policy Financing Programme project was disbursed on June 28, 2024.
This loan project is a part of the broader $2.25 billion approved by the World Bank for Nigeria on June 13, 2024, to bolster Nigeria’s economic stability and support its vulnerable populations.
The $ 1.5 billion loan comprises two separate agreements between Nigeria and the World Bank. They are an International Development Association credit of $750million, and the International Bank for Reconstruction and Development loan of $750million. The amount disbursed includes the entire $750 million from the IDA loan and $1.88 million from the IBRD of the World Bank, with an undisbursed balance of $748.13 million.
The reported $35.93 billion as of June 18, 2024, on the CBN’s website is lower than the $36.89 billion declared by the apex bank’s governor, Olayemi Cardoso.
Cardoso recently stated that the country’s external reserve has increased to $36.89 billion as of July 16 2024 during an engagement with the Senate Committee on Banking, Insurance, and Other Financial Institutions in Abuja on Friday.
He noted that the CBN’s monetary policies and actions have stimulated growth and stability in the nation’s economy, stating the nation’s external reserves as of the end of June, could finance over 11 months of imports of goods and services, or 14 months for goods alone. Cardoso explained that this is significantly higher than the international benchmark of 3.0 months, indicating a strong buffer against external shocks.
He also noted that the banking sector remains robust and diverse, comprising 26 commercial banks, six merchant banks, and four non-interest banks.
He said, “The spread between official and BDC rates has narrowed significantly from N162.62 in January to N47.22 in June indicating successful price discovery, increased market efficiency and reduced arbitrage opportunities.
“The stock of external reserves increased to $36.89 billion by July 16, compared to the $33.22 billion at the end of Dec 2023, and driven largely by receipts from crude oil-related taxes and third-party receipts. In the first quarter of 2024, we maintained a current account surplus and saw an improvement in our trade balance.”
Cardoso said that while the CBN was encouraged by positive trends, it remained vigilant and committed to implementing policies that support sustainable growth in the financial markets and maintain overall economic stability.
