The country’s external reserves declined by 10.86% year-on-year, according to the Central Bank of Nigeria (CBN) data.
The reserves which stood at $37 billion on the first business day of 2023 dwindled to $33 billion in the corresponding period of 2024.
This fluctuation echoes the movements witnessed towards the end of 2023 when the external reserves oscillated within the range of $32 billion to $33 billion.
On December 27, external reserves stood at $32,870,500,673 before increasing to $32,892,386,111 on December 28 and $32,912,429,900 on December 29, 2023.
Economic analysts and financial experts are closely monitoring these movements, acknowledging the pivotal role of external reserves in bolstering Nigeria’s economy against unforeseen economic shocks.
The reserves act as a crucial buffer, contributing to maintaining stable exchange rates, managing inflationary pressures, and instilling confidence in the nation’s monetary policy.
While these figures depict a YoY decline, analysts anticipate a potential boost with the expected inflow of the AFEXIM loan, poised to enter the country’s coffers.
The analysts at Meristem, in their 2024 outlook, underscored the significance of the AFREXIM loan, considering it a welcome short-term solution.
However, they emphasized the need for more permanent solutions to address Nigeria’s inherent foreign exchange market challenges.
The report highlighted that, as of September 2023, the external reserves remained above the benchmark of 3.0 months of import cover recommended by the International Monetary Fund (IMF) standard.
Also, the reserves could finance up to 6.30 months of imports.
The imminent receipt of the AFREXIM bank’s loan is anticipated to further elevate the country’s foreign reserves levels, providing a much-needed injection for the Nigerian economy.
“In our macroeconomic note, we highlighted that the AFREXIM loan is a welcome short-term fix; however, Nigeria’s inherent FX market issues require more permanent solutions,” stated analysts at Meristem.
Addressing the existing FX backlog and meeting new legitimate FX demands would necessitate sustainable inflows into the reserve balance, emphasizing the need for a comprehensive approach to fortify the country’s economic resilience.