Nigeria’s Foreign Reserves Start 2023 at Its Lowest Level in Two Years, Naira to Come Under Pressure
- Nigeria's foreign reserves kick off 2023 at one of the lowest levels in the last two years
- CBN needs the reserves to be able to withstand dollar demand pressure by importers, students among others which affects the naira's value
- Naira in 2022 dropped more than 23 percent of its value and signs are it will continue in 2023
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The Central Bank of Nigeria's external reserves as of Thursday, January 4, 2022, stood at $37.1 billion.
This is according to checks on CBN foreign reserves data on its website.
Analysis of the data shows, the current level of the reserves is the first time since 2021, and just the second time in seven years that it has begun the year below $38 billion.
Source: Getty Images
In 2022, which is regarded as one of the most difficult years for the Naira, reserves opened the year at $40.51 billion.
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This indicates that after the first week of the new year, Nigeria's foreign reserves stood $3.8 billion lower in 2023 compared to 2022.
Here is how the foreign reserves have started the year since 2017
- 2023- $37.15bn
- 2022 $40.51bn
- 2021 $35.6bn
- 2020 $38.53bn
- 2019 $43.07bn
- 2018 $38.91bn
- 2017 $26.09bn
What are Foreign Exchange Reserves and why is it important?
Foreign exchange reserves are assets held on reserve by the CBN in foreign currencies. These reserves are used to back liabilities and influence monetary policy.
The foreign exchange reserves is made up of Foreign currencies, deposits, bonds, treasury bills, and other foreign government assets are among them.
These assets are retained for a variety of reasons, the most important of which is to ensure that a government or its agency has backup cash if its national currency quickly devalues.
With lower reserves, there will be demand pressure which we have a serious effect on the value of the Naira.
Naira records first loss in 2023
Already, Naira has recorded its first loss in 2023, as the foreign exchange market resumes full activities
The Nigerian currency drop in value was recorded across official and black market foreign exchange markets.
Naira experienced significant losses in 2022, and experts have shared their predictions for 2023.
Source: Legit.ng
