Nigeria’s External Reserves Continue to Decline in 2023

The Central Bank of Nigeria (CBN) has reported a further decline in the country’s external reserves, with figures showing a fall of $317m in February.

This is a continuation of a trend that saw the reserves drop by $3.43bn in 2022 after falling from $40.52bn at the end of December 31, 2021. A check by Investors King shows that the reserves stood at $36.67bn as of February 27, 2023, down from $36.99bn at the end of January.

The Governor of the CBN, Godwin Emefiele, has attributed the decline in external reserves to exchange rate pressure and slow accretion.

He noted that demand has remained high while accretion has been slow, leading to a marginal decline in reserves in December. Members of the Monetary Policy Committee have also expressed concern about the situation, with one member stating that the reserves position may not be precarious but is inadequate to maintain exchange rate stability.

Domestic challenges have also contributed to the decline in external reserves. Despite improved oil production, it remains below OPEC allocation quotas due to high production costs, oil theft, and pipeline vandalism. This has reduced fiscal space, resulting in increased debt burden and reduced foreign reserves accretion.

Trade and current account balances have also been impacted by high imports and low foreign inflows, leading to persistent exchange rate pressure.

The CBN has been taking steps to address these challenges, including promoting export and reducing imports.

However, more needs to be done to boost oil production, increase foreign inflows, and reduce fiscal pressure. The decline in external reserves is a cause for concern, and urgent action is needed to stabilize the exchange rate and ensure economic stability.