This decline follows a previous increase to $37.88 billion as of July 15, 2024, from $34.76 billion at the end of June 2024.
In July, the CBN had forecasted a slight reduction in Nigeria’s external reserves for 2024, as outlined in its inaugural ‘Macroeconomic Outlook: Price Discovery for Economic Stabilisation’ report. The central bank attributed the anticipated decrease to debt service obligations and other commitments.
The report noted, “The external reserves, which stood at $33.09 billion in 2023, could see a slight decrease in 2024, assuming continued payments of outstanding foreign exchange forward obligations, matured foreign exchange swaps, and debt service.”
However, it added that improvements in crude oil earnings and recent reforms in the foreign exchange and energy sectors could help cushion the drop.
On July 8, 2024, Nigeria’s foreign reserves surpassed $35.05 billion for the first time in about a year and have remained above that level since.
At the last Monetary Policy Committee (MPC) meeting in July 2024, member Bala Moh’d Bello stressed the importance of maintaining exchange rate stability to ensure stable prices, given the significant impact of exchange rate fluctuations on import prices and inflation.
“The central bank has made substantial efforts to stabilise the foreign exchange market, leading to increased foreign portfolio investment inflows and reduced exchange rate volatility,” Bello said.
He also emphasised that medium and long-term strategies are being explored to ensure the exchange rate reaches a market-determined equilibrium level.
External reserves, which are assets held by the CBN in foreign currencies, include banknotes, bonds, Treasury bills, foreign government securities, and commodities like gold.
These reserves play a critical role in shaping monetary policy, supporting the national currency, and facilitating international trade, while also serving as a buffer to meet external obligations and manage exchange rates.
MPC member Lydia Shehu Jafiya also highlighted improved foreign exchange inflows, which increased by 38.26 percent (month-on-month) between April and May 2024, driven by higher receipts from oil and non-oil proceeds.
She noted that the gross external reserve position at the end of June 2024 could cover 7.59 months of imports of goods and services and 10.88 months of goods imports, with relative stability observed in the foreign exchange market.
However, another MPC member, Mustapha Akinkunmi, pointed out that the naira depreciated to ₦1,605.50 on July 19, 2024, from ₦1,525.00 on June 28, 2024. Gross external reserves stood at $34.88 billion as of June 2024, projected to be around $32.93 billion by the end of May 2024, covering about 11 months of goods imports and 8 months of goods and services imports.
On Wednesday, an update indicated a decline in reserves from $36.872 billion on August 7, 2024, to $36.620 billion as of August 12, 2024.
CBN Governor Olayemi Cardoso emphasised the need for attention to developments in foreign exchange markets, given the exchange rate’s significant impact on inflation.
He attributed the recent stability in the exchange rate to increased market confidence in the actions of the MPC.
“This fragile equilibrium must be carefully managed to avoid jeopardising the achievements so far in attracting more capital flows to sustain the recent market stability,” Cardoso said.