The Nigerian foreign reserves declined by $3.43 billion in 2022, according to the latest report from the Central Bank of Nigeria (CBN). The reserves dipped from $40.52 billion it opened the year to $37.1 billion.
The data analysis shows that the cause of the $3.43 billion loss in Nigeria’s foreign reserves is linked to the persistent intervention of the Central Bank of Nigeria in the official foreign exchange (FX) market in a move to protect the Naira.
However, regardless of the involvement of the Central Bank, the exchange rate at the Importers and Exporters window declined by 5.7% in 2022, while closing the year at N461.5/$1 compared to N435/$1 recorded as of the close of trade in 2021.
Furthermore, the exchange rate at the parallel market declined by 23.1% to an average of N735/$1 in a highly inflationary year that witnessed an alarming increase in exchange value to N900/$1 in November of last year.
The data further indicated that the foreign reserves in 2021 was worth noting that the external reserve rose past $40 billion in 2021 as a result of an influx from the International Monetary Fund (IMF) as well as a $4 billion Eurobond issuance.
Investors King understands that in August 2021, Nigeria received a total amount of $3.35 billion from the International Monetary Fund as part of the Special Drawing Rights (SDRs).
Whereas, a month after, Nigeria also raised a $4 billion Eurobond from the international debt market, which saw the country’s foreign reserves improve from around $36 billion to over $41 billion in November 2022.
However, in 2022 a lack of Foreign Exchange (FX) inflows and increased demand for greenbacks plunged Nigeria’s foreign reserve.
The data which also showed that Foreign Direct Investments (FDI) in Nigeria dwindled significantly since the beginning of the covid-19 pandemic, falling to record levels.
Also, according to data from the National Bureau of Statistics (NBS), Nigeria received $302.13 million as FDI between January and June 2022.
This is significantly lower than pre-pandemic levels. For example, in the same period of 2019, Nigeria recorded an FDI of $429.72 million (2018: $507.96 million).
The shortage of foreign direct investments (FDIs), which has been ascribed as a socioeconomic factor, has also impacted the growth level of the nation’s reserve and by extension the exchange rate.
In the same view, foreign portfolio investment also took a downturn in the past three years, falling to $1.71 billion in the first half of 2022 from $1.77 billion and $4.69 billion recorded in the subsequent quarter of 2021 and 2020.
The World Bank forecast that Nigeria’s diaspora remittance will hit $20.9 billion in 2022, a 7.5% increase from the previous year.
According to the Nigerian Upstream Petroleum Regulatory Commission, Nigeria’s daily crude oil production output increased to 1.41 million barrels in November 2022 and is expected to hit 1.6 million barrels per day in Q1 2023.
