Nigeria’s FX reserves defy forecasts, rise to $35.9bn

Nigeria foreign exchange reserve has increased to $35.93bn as of July 18 despite predictions of a slump. This represents a gain of $160 from the previous day’s figure of $35.77bn.

The country’s foreign exchange reserves had been steadily increasing over the past two weeks, with a cumulative gain of over $1.2bn.

As of July 18, 2024, the reserves stood at $35.92bn, up from $34.65bn on July 4, 2024. The reserves have also risen over the past 14 days, with an increase of $160m from July 17 to July 18, 2024.

Experts noted that this positive trend was a welcome development for the Nigerian economy, which had faced challenges in recent times due to declining oil prices and other external factors.

Financial experts have attributed the increase in FX reserve to several factors, including improved oil prices, increased diaspora remittances, and foreign investment inflows.

An economist at Lotus Beta Analytics Shadrach Israel stated, “The reliance on improved oil prices, diaspora remittances, and foreign investment inflows may not be sustainable in the long term.

“It is crucial for the Nigerian government to continue implementing policies that promote diversification, support non-oil exports, and address the underlying structural issues in the economy.”

“Otherwise, this recent gain in FX reserves may be short-lived, and the economy may struggle to withstand future challenges,” he added.

An FX market analyst at London-based Ballinger & Co. Kyle Chapman, stated in a Reuters publication that, “a backlog of unsettled forwards, undelivered promises of dollar inflows and a two-decade peak in inflation have translated into a tumultuous year for the naira, which has lost over 50% of its value to become the third worst-performing global currency in 2023.”

In contrast to the positive trend in the recent increase, the Central Bank of Nigeria had projected that the external reserves could reduce slightly in 2024 on the back of debt service and other obligations.

The Governor of the CBN, Olayemi Cardoso, stated that, “the bank would extend its monetary policy tightening stance to tame rising inflation and sustain reforms to strengthen the foreign exchange market.”

An economist at Phemmy Gracey, limited Olufemi Idris stated that, “the growth in foreign exchange reserves is expected to have a positive impact on the Nigerian economy, including stabilising the exchange rate, improving liquidity in the foreign exchange market, and enhancing the country’s creditworthiness.”