Nigeria’s external reserves now $37.05 billion, says Cardoso

The Central Bank of Nigeria (CBN) Governor Yemi Cardoso announced that Nigeria’s external reserves have risen to $37.05 billion as of July 18, 2024. This marks a significant increase compared to the $34.70 billion recorded at the end of June 2024, reflecting an improvement in the country’s financial stability.

Cardoso disclosed this on Tuesday during a press briefing in Abuja after the apex bank’s 296th Monetary Policy Committee Meeting held on Monday and Tuesday.

The recent uptick in Nigeria’s foreign exchange reserves represents the highest level since early 2023, demonstrating a steady recovery from the lows experienced earlier this year. For instance, the reserves were as low as $32.11 billion in April 2024 before gradually climbing back up, reaching $33.58 billion by mid-June 2024​.

Factors Contributing to the Increase

Several factors have contributed to this positive trend, including increased crude oil prices, improved export earnings, and strategic efforts by the CBN to manage the nation’s currency.

The bank’s policies, such as the introduction of a flexible exchange rate regime and restrictions on access to foreign exchange for certain goods and services, have been instrumental in stabilising the naira and boosting investor confidence.

What are External Reserves

Foreign exchange or external reserves are assets denominated in a foreign currency that are held by a nation’s central bank. They include foreign banknotes, deposits, bonds, treasury bills and other foreign government securities. These assets serve many purposes but are most significantly held to ensure that a government or its agency has backup funds if their national currency rapidly devalues.

Key Decisions from the MPC Meeting

In addition to the increase in external reserves, Arbiterz reports that the Monetary Policy Committee (MPC) made several key decisions at its recent meeting.

The committee raised the Monetary Policy Rate (MPR) by 50 basis points to 26.75%  per cent from 26.25%. This decision aims to curb inflationary pressures and stabilise prices in the economy.

The asymmetric corridor around the MPR was adjusted from +100 to -300 to +500 to -100 basis points, while the cash reserve ratio for deposit money banks was retained at 45 per cent and for merchant banks at 14 per cent. The liquidity ratio remains unchanged at 30 per cent.

The MPC expressed its commitment to price stability and acknowledged the ongoing challenges of food and energy costs. It highlighted the need for collaborative efforts with the fiscal authorities to address food inflation and improve the country’s food supply chain.

Also Read: Naira gains as Nigeria’s FX reserves hit $34.7bn

Measures such as the 150-day duty-free import window for essential food commodities are expected to help moderate domestic food prices in the short term.

The committee also noted the importance of maintaining a stable exchange rate and improving foreign exchange inflows, particularly through diaspora remittances. Efforts to enhance domestic refining capacity are also seen as critical to reducing foreign exchange expenditures on imported refined petroleum products.

Overall, the MPC emphasised the importance of staying the course with its tightening cycle to address inflationary pressures and ensure sustainable economic growth.

The next MPC meeting is scheduled for September 23-24, 2024, where further assessments and policy decisions will be made to support Nigeria’s economic stability and growth.