NIGERIA’S external reserves have reached a 22-month high of $37.31 billion, indicating a substantial influx of foreign capital into the country’s economy.
According to data from the Central Bank of Nigeria (CBN), as of September 18, 2024, the reserves reached their highest point since November 4, 2022, when they were at $37.36 billion.
This development signifies a notable improvement in Nigeria’s foreign currency position.
The external reserves are a representation of the nation’s foreign currency stock. Nevertheless, they have not significantly affected the declining value of the naira, which Bloomberg identified as one of the 10 worst-performing currencies worldwide on September 20.
These reserves are vital for assessing the country’s ability to fulfill international financial commitments and stabilize the local currency.
On a year-to-date basis, the reserves have increased by 12.99%, or $4.29 billion, from $33.02 billion recorded at the beginning of the year on January 2, 2024.
Several factors have driven the rise in external reserves.
Major sources of the inflows include the federal government’s domestic dollar bonds, which have attracted foreign investments; remittances from Nigerians living abroad; multilateral loans from international bodies; and foreign portfolio investments.
Comparatively, Nigeria’s foreign reserves grew by 12% year-on-year, adding $4.03 billion to the $33.28 billion recorded on September 18, 2023.
The federal government raised over $900 million from investors by issuing $500 million as part of the first series of a $2 billion domestic US dollar bond intended to stabilize the economy.
According to the CBN, Nigeria received $553 million in remittances over a one-year period, from July 2023 to July 2024.
Additional inflows into the economy during this period included a $3.3 billion oil facility from AfreximBank and $2.25 billion from the World Bank Group.
Foreign exchange inflows into the economy surged by 57% year-on-year, attributed to the CBN’s consistent policy measures.
CBN data indicated that the country registered $8.86 billion in FX inflows in February 2024, compared to $5.66 billion during the same month in 2023.
The CBN’s economic report for February 2024 highlighted a significant increase in new investments in the economy, which rose to $1.24 billion, up from $0.33 billion in January 2024.
Foreign direct investment inflows increased to $0.06 billion, up from $0.03 billion in the previous month.
Portfolio investment inflows surged to $0.80 billion from $0.12 billion, driven by higher returns on money market instruments and bonds. Similarly, other investment capital, primarily loans, rose to $0.37 billion from $0.18 billion in the preceding period.