Nigeria’s foreign exchange reserves fell to $36.32bn as of August 29, 2024, according to data released by the Central Bank of Nigeria and accessed by The PUNCH on Sunday.
This marks a decline from the year’s peak of $36.70bn recorded on July 29, 2024. The data highlights a steady reduction in the reserves over the past month, raising concerns about the country’s economic stability.
Foreign exchange reserves, often referred to as FX reserves, are critical to a nation’s economic health. They serve as a buffer against external shocks and are a key tool for managing currency stability.
Nigeria’s reserves, primarily composed of United States dollars, play a crucial role in supporting the value of the naira, ensuring that the country can meet its international payment obligations, and maintaining investor confidence.
The rise to $36.70bn in July was viewed positively, reflecting increased oil revenues and a successful bond issuance by the Nigerian government earlier in the year.
However, the drop in August has sparked concern. An economist at Phemmy Gracey Limited, Olufemi Idris, stated that “the decline suggests growing pressures on the reserves, possibly due to increased demand for foreign exchange in the economy and a slowdown in foreign inflows.”
Comparatively, the reserves were at $34.19bn in June 2024 and $32.69bn in May 2024, showing a recovery trend that was disrupted in August.
The reserves had experienced fluctuations throughout the year, from $33.35bn in end of January 2024, rising to $33.67bn in February, and $33.83bn in March. However, they dipped slightly to $32.25bn in April before embarking on the upward trend that peaked in July.
Experts suggest that the recent decline may prompt further interventions from the CBN, which has been active in the foreign exchange market to stabilise the naira and manage inflationary pressures.
Analysts warn that if the trend continues, it could undermine the country’s ability to meet external obligations and maintain the current exchange rate regime.
