IMF Predicts Nigeria’s Foreign Reserve Holdings in 2024 as Naira Falls to Lowest in Official Market
- The International Monetary Fund (IMF) has predicted a decline in Nigeria’s foreign reserves
- The Fund said Nigeria’s reserves will decline to $24 billion from the current account holdings of $33 billion
- The IMF said Nigeria will experience challenging periods between 2024 and 2025 as FDI inflows dry up
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The International Monetary Fund (IMF) has said Nigeria’s foreign reserve is expected to drop significantly to $24 billion in 2024.
The forecast was contained in the Fund’s latest country report on Nigeria, showing potential challenges ahead for the country.
Source: Twitter
Nigeria's foreign reserves hit $33.12 billion
As of February 8, 2024, data from the Central Bank of Nigeria (CBN) says Nigeria’s foreign reserve is put at $33.12 billion, showing a substantial decline on the way, the IMF report said.
The Fund noted that the first half of 2023 saw a surplus in the current account despite a notable decline.
The drop has been attributed to a decline in hydrocarbon exports due to ongoing oil theft and a lack of investment in essential oil production.
Also, profit repatriation from the oil sector has been downturned, offsetting the adverse effects on the current account.
IMF says Nigeria will witness surplus investments
The report said Nigeria had witnessed a drop in Foreign Direct Investment (FDI) and experienced an uptick in portfolio outflows, including equity and Eurobond repayments and repatriation.
According to the IMF’s report, Nigeria will experience a challenging period from 2024 to 2025, worsened by an absence of new Eurobond issuances, significant repayment of existing funds and Eurobonds totalling $3.5 billion, and continued portfolio outflows.
Reports say Nigeria’s officially reported reserves are expected to decline to $24 billion in 2024 and might later recover to $38 billion by 2028 as portfolio investments are projected to rise again.
The report said:
“Through 2024–25, the financial account will likely deteriorate, with no projected issuance of Eurobonds, large Fund and Eurobond repayments of $3.5 billion, and portfolio outflows.
“Hence, despite a current account surplus, officially reported reserves are projected to decline to $24 billion in 2024 before increasing again to $38 billion in 2028 as portfolio inflows resume.”
Nigeria's current reserves to cover six months of imports
The IMF said that the Central Bank of Nigeria reported the 30-day average of gross international reserves had fallen to $33 billion by October 2023, marking a decline of almost $4 billion from the end of 2022.
The CBN said the current reserve holdings can only cover six months of import cover and meet 83% of the IMF’s Assessing Reserve Adequacy metric.
Investment banker and financial analyst Ijeoma Nwogu said the current IMF projections needed to reflect the reforms carried out by the Nigerian government and the CBN.
"When we look at the reforms embarked on by CBN in the last two months, you will notice that there is an improvement in the FDI and Forex inflows, which is usually a precursor to boosting Forex reserves."
In the last seven days, the apex bank has calmed the Forex markets by issuing seven circulars that somewhat boosted the Forex market," she said.
IMF sends special message to CBN on Nigeria's 'Debt'
Legit.ng reported that the International Monetary Fund (IMF) has asked the Central Bank of Nigeria (CBN) to settle the overdue FX backlog to rebuild trust in the apex bank and the naira.
The organisation disclosed this in its recent Executive Board Post-Financing Assessment with Nigeria report.
The IMF insisted that paying the CBN's dollar obligations would rebuild confidence in the bank and the Nigerian currency.
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Source: Legit.ng
