Nigeria’s external reserves declined by $1.46 billion in the first quarter (Q1) of 2023 from $36.67 billion to $35.53 billion, according to data obtained from the Central Bank of Nigeria.
This decrease has been attributed to the decline in global crude oil prices and the ongoing uncertainty in the global market.
In 2022, Nigeria’s external reserves also decreased by $3.43 billion, dropping from $40.52 billion as of December 31, 2021 to $37.09 billion by December 29, 2022. In response, the Central Bank of Nigeria launched a new initiative called the ‘RT200 FX Programme‘ earlier in 2022.
The program aims to increase forex supply through non-oil sectors and achieve $200 billion in FX repatriation exclusively from non-oil exports over the next three to five years. It has five key components: a value-adding exports facility, non-oil commodities expansion facility, non-oil FX rebate scheme, dedicated non-oil export terminal, and biannual non-oil export summit.
As an economy heavily reliant on crude oil revenues, the depletion of Nigeria’s foreign reserves is a cause for concern as it impacts the country’s local currency, job creation, and overall economic growth. The depletion of foreign reserves results in a weak local currency against global counterparts, making it hard for businesses to pay for foreign goods and services.
With over 90% of Nigeria’s consumption being imported, the decline in foreign reserves has made it increasingly difficult for the government to sustain its imports and meet its foreign debt obligations.
The weakened naira has also contributed to high inflation rates, which have made it difficult for Nigerians to afford essential goods and services, while the rising cost of living has led to a decline in the standard of living and the country’s overall economic growth.
Similarly, the persistent decline in foreign direct investment is largely due to the weakened Nigerian naira and other economic uncertainties as foreign investors remained wary of unclear economic policy.