CBN Unveils New Plan for Nigeria's Foreign Reserves, Aims to Reduce Dollar Dominance
- Just like many other countries, the CBN has announced plans to diversify Nigeria’s foreign reserves
- The apex bank wants to reduce reliance on the US dollar and include other currencies and assets
- The plan will help Nigeria mitigate risks associated with currency fluctuations, and the CBN governor believes it will be a game changer
Legit.ng journalist Dave Ibemere has over a decade of experience in business journalism, with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The Central Bank of Nigeria (CBN) has revealed plans to diversify the nation's foreign reserves from a heavy reliance on the US dollar.
The announcement was made by Olayemi Cardoso, Governor of the CBN, during the opening of the Afreximbank Annual Meetings (AAM) held in Abuja on Wednesday, June 25.
Source: Getty Images
Foreign reserve diversification involves increasing holdings in a broader range of assets beyond the US dollar, such as the euro, yen, yuan, gold, and Special Drawing Rights (SDRs).
Nigeria plans for more assets
According to the CBN governor, the move will help mitigate risks associated with currency fluctuations, Vanguard reports.
Although he did not specify the diversification strategy, Cardoso noted that these reforms are part of broader efforts to optimise Nigeria's FX market dynamics in favour of economic stability.
He pointed at the recent initiatives aimed at supporting diaspora remittances and reinforcing the stability of the naira.
Governor Cardoso said:
"“As part of our ongoing policy reforms in the foreign exchange market to boost diaspora remittances and support naira stability, we have introduced two financial products, namely the non-resident Nigerian ordinary account and the non-resident Nigerian investment account designated to serve Nigerians living abroad.
“This initiative is expected to provide a secure and efficient platform for managing funds investing in the Nigerian financial markets. This would harness the economic potential of Nigerians in the diaspora by boosting remittances and fostering investment in critical sectors of the economy.
“It is therefore imperative for initiatives such as this to be embraced to ensure that Africa and its diaspora continue to act in unison.
“And let me say also that for us, this particular initiative is certainly going to be a game changer, and people will now begin to understand a lot better how Nigeria is diversifying its revenue base and its reserve base, so please watch that space.”
The CBN boss stressed the need for African nations to shield the continent from global shocks.
Source: Getty Images
Ghana buy oil with gold
Recently, Ghana’s government announced plans for a new policy to buy oil products with gold rather than US dollar reserves.
Vice President Mahamudu Bawumia, who revealed this, said it is meant to tackle dwindling foreign currency reserves coupled with demand for dollars by oil importers, which is weakening the local cedi and increasing living costs.
Bawumia said:
"The new policy will fundamentally change our balance of payments and significantly reduce the persistent depreciation of our currency."
US dollar hit 3-year low
Earlier, Legit.ng reported that the Nigerian currency has appreciated slightly against the US dollar in the official foreign exchange market
New data obtained shows that the naira has also improved against other foreign currencies
The US dollar is currently at a 3-year low in the global currency market
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Source: Legit.ng
