The Central Bank of Nigeria has revealed that Nigeria’s foreign reserves have decreased to $38.88 billion as of Monday, February 2024......CONTINUE READING THE ARTICLE FROM THE SOURCE>>>>>
This latest figure is $2.2 billion when compared to the $40.88 billion the reserves stood at at the beginning of January 2024.
The current balance is the first time that Nigeria’s reserves fell below $39 billion in 2024 amid moves by the CBN to clear forex obligations to avoid pressure on the naira.
Legit.ng reported that Olayemi Cardoso, the CBN governor said plans are on the way to commence final settlements of the outstanding amount from the $7 billion foreign exchange obligation backlog.
His words:
“We must not forget where we are coming from. The era of multiple exchange rates, which created privileges for a select few at the expense of most Nigerians, severely undermined market integrity.
“As an example, the $7 billion of FX backlogs that have taken over 12 months to verify has led to the discovery of multiple unethical and even illegal practices that we should not be proud of as a nation.
“The forensic verification process is now near complete, and final settlements will be processed accordingly.”
Sources of inflows
Nigeria’s foreign reserves have been rising steadily since President Bola Tinubu’s administration ceased paying fuel subsidy, which led to an increase in fuel prices.
The growth in reserves during the month reflects a significant improvement in foreign exchange inflows, likely driven by higher oil export revenues, external borrowing, and increased investor confidence in Nigeria’s financial markets.
Foreign reserves’ importance?
Foreign reserves growth is important because it acts as a safety net for a country’s economy, allowing it to stand against currency fluctuations, sudden capital outflows, or economic crises by providing readily available funds to intervene in the foreign exchange market and stabilise the domestic currency.
Some of the reasons FX reserves growth is important include:
Naira exchange rate improves
Legit.ng reported that over the past month, the exchange rate for the naira against the US dollar has been positive.
For example, in the black market, the naira’s value has improved by over N100, and the dollar is now below N1,600.
It is the same scenario for the naira against the euro, and British pound sterling in the official market which the latest exchange rates confirm its positive performance.