Nigeria’s forex reserves hit 3-month high amid exchange rate stability

Nigeria’s foreign exchange (FX) reserves have climbed to their highest level since March 28, 2024, marking a significant financial achievement that aligns with the longest stretch of exchange rate stability seen in over a year.

This milestone comes as Nigeria secures a series of financial commitments from the World Bank through new multilateral loans.

The latest data from the Central Bank of Nigeria (CBN) reveals that the reserves now stand at $33.58 billion as of June 19, 2024. This marks a substantial recovery from the end of March 2024, when the reserves peaked at $33.83 billion before entering a period of decline.

The rise in FX reserves follows three months of notable fluctuations, which saw the reserves plummet to a low of $32.11 billion on April 19, 2024, raising concerns about the nation’s financial stability. In response, the central bank Governor addressed the issue at the IMF Spring meeting in April.

Since then, a steady and consistent upward trajectory has been observed, coinciding with a period of exchange rate stability. This month, the official exchange rate has averaged N1,481/$1, fluctuating within a narrow band of plus or minus 0.06%.

According to CBN data, forex reserves have risen by 5%, or $1.47 billion, in the last two months, climbing from $32.11 billion on April 19, 2024, to $33.58 billion by June 19, 2024. This growth represents a significant boost for the country’s external reserves, as the CBN continues to implement policies that attract forex liquidity.

Critics, however, will note the improved liquidity position, considering the myriad of policies implemented by the central bank over the past year and several promises of potential forex inflow from foreign portfolio investors. Improved liquidity in forex turnover has been observed, with the average turnover for June to date at $199 million daily compared to $168 million in the same period in May. Total forex turnover in June is now $2.1 billion, spanning 11 days of trading.

The Monetary Policy Committee (MPC) recently urged the CBN to focus on boosting external reserves. The Monetary Policy Communique from its 295th meeting noted:

“The Committee also noted the marginal increase in the external reserve balance between March and April 2024 and urged the Bank to sustain its focus on accretion to reserves.”

To ensure a steady flow of foreign exchange into the country, the CBN plans to double diaspora remittance inflows this year.

Additionally, Afrexim Bank recently disbursed $925 million, another tranche of the $3.3 billion crude oil-backed loan agreement with the NNPC from last year. This brings the total payment for the facility to $3.175 billion, aiming to stabilize the forex market amid severe volatility.

Moreover, the World Bank has approved $2.25 billion in loans to Nigeria to bolster economic stability and support vulnerable populations. This financial injection is designed to provide immediate financial and technical support for Nigeria’s urgent economic stabilization efforts.

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