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Nigeria’s Central Bank Reveals Depleting Foreign Reserves is Due to Debt Servicing

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Washington DC, USA – During the ongoing International Monetary Fund/World Bank Spring Meetings in Washington D.C., Central Bank of Nigeria Governor, Olayemi Cardoso, addressed the significant concerns regarding the abrupt decline in Nigeria’s foreign exchange reserves.

Mr Cardodo elucidated on Wednesday, April 17, 2024,  that the decrease was not for naira defense as widely speculated, but rather for partial debt repayments.

The recent statistics from the CBN revealed a sharp drop in the reserves, decreasing by $2.16 billion over 29 days, settling at $32.29 billion as of April 15, 2024, from $34.45 billion recorded on March 18, 2024.

This decline followed a 43-day period during which the reserves had actually increased by $1.28 billion, attributed to increased remittances from Nigerians abroad and heightened foreign investment.

In his presentation titled, “Catalyzing Change: Reforming Monetary Policy in Nigeria,” Cardoso emphasised a shift towards minimizing market interventions by the bank, advocating for a system where “willing buyers and willing sellers” determine prices.

This approach is part of broader reforms aimed at fostering a more fluid foreign exchange market.

“The little shift you have seen in our reserves has nothing to do with defending any naira and that is not our objective,” Cardoso explained.

He reassured stakeholders by mentioning the recent injection of $600 million into the reserves, indicating an expected rebound in the coming days.

Moreover, Cardoso highlighted the trading dynamics within the forex market under his tenure, noting that the country has seen transactions of up to $1 billion daily, a significant increase compared to previous months’ figures of $200 million to $300 million.

This surge in forex liquidity reflects the central bank’s successful measures in enhancing market efficiency and accessibility.

Addressing inflation, which remains a pressing issue, the governor disclosed steps taken by the central bank in collaboration with the Ministry of Finance, including discontinuing the practice of using Ways and Means, a mechanism previously used for government financing.

The CBN’s stance on limiting intervention in the forex market, while ensuring sufficient liquidity and credible debt repayments, illustrates a strategic pivot in Nigeria’s economic management, aimed at stabilising the financial system and fostering economic growth.

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