- Nigeria's external reserve is currently in its best run as CBN has consistently added rather than withdraw
- In the last 20 days, the Central Bank of Nigeria has added over $257 million pushing Nigeria's reserves to over $39.79 billion
- Should Nigeria decides to pay off its foreign debts, the current level of foreign exchange reserves is enough to cover
The month of April is shaping up to be a recovery month for Nigerian external reserves after a $317 million billion decline in March.
According to data from the Central Bank of Nigeria, foreign reserves increased jumped by 0.61 per cent or $257.5 million to a level of $39.79 billion on April 20th from the $39.5 billion it open the month.
A detailed examination of CBN data shows a consecutive 20 days of increase with no withdrawals.
3 months after Buhari unveiled largest rice pyramid in Africa, Nigeria resumes rice import from neighbours
Importance of the reserves
One of the key mandates of CBN is its monetary policy toolkits which include currency intervention to ensure that the exchange rate of the naira relative to other currencies is stable.
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To achieve this, CBN needs strong reserves to meet importer and traveller demands.
Putting in context analysts at Cordros Capital, said:
"CBN has enough supply to support the FX market over the short term, given inflows from the recently issued Eurobond and the IMF’s SDR."
They added that foreign inflows are paramount for sustained FX liquidity over the medium term, in line with their expectation that accretion to the reserves will be weak given that crude oil production levels remain quite low.
Nigeria's foreign debt
Data from the Debt Management Office (DMO) of Nigeria shows that Nigeria's outstanding external debt stood at $38.3 billion as at the end of 2021.
The highest amount is owed via Multilateral debt(World bank, IMF, others) which stood at N18.65 billion, followed by Commercial(from investors) at $14.66 billion.
Bilateral(Countries) debt stood at $4.46 billion and promissory notes $600.64 million.
Ex-CBN Head criticises Emefiele's decision to ban BDC operators from selling forex
Meanwhile, Obadiah Mailafia, a former deputy governor of the Central Bank of Nigeria (CBN), has criticised the decision of the apex bank to stop providing foreign exchange to bureau de change operators.
Mailafia said the decision could weaken the value of the naira against the dollar and other foreign currencies, as there might be a scarcity of forex.
With his experience of the banking system in Nigeria, Mailafia said the banks might hoard forex for themselves and sell at a high cost to buyers whenever the lenders want.