How Nigeria’s External Reserve Dropped To $33bn In September – Report

The federal government has expressed displeasure over the nation‘s external reserves which dropped to $33.28 billion as of September 2023, from $37.1 billion recorded in December 2022.

According to the 2024-2026 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP), a copy made available to newsmen, the Central Bank of Nigeria (CBN), continues to defend the naira and fund import bills at the expense of the reserve level.

According to the paper, “CBN’s dollar supply in the FX market has been impacted by the drying inflows of the dollar into the Nigerian economy. The total foreign exchange supply by the CBN to the economy in 2022 amounted to $15.27 billion. 15.3 percent lower than the $18.03 billion supplied in 2021, all of which were supplied to I&E window, small and medium scale enterprises, and invisible.

“The decline in the amount of foreign exchange supplied by the CBN is partially attributed to the halt of FX sales to Bureau De Change (BDC) operators as in previous years.

“The CBN continues to adopt policies towards increasing foreign exchange inflows into the country, especially through non-oil export and improved diaspora remittances.”

Also, the document indicated that the apex bank is implementing measures to attract foreign exchange inflows, especially from portfolio investors, Foreign Direct Investments (FDl), and export proceeds.

Year-to-date, $1.7 billion was repatriated to the economy while about $970 million was sold at the I&E window adding that the current level of foreign reserve provides sufficient import cover.

Meanwhile, there appears to be a loss of confidence in the market and consistent erosion of the reserve.

The document also indicated a steady decline in Nigeria’s capital importation for three consecutive years, from an annual level of $16.812 billion in 2018 to $5.32 billion in 2022.

Quarterly data also showed capital importation declined by 51.51percent from $2.187billion recorded in 2021 to $1.06 billion in 04 2022 with trade credits, loans, and currency deposits representing the largest component of capital importation in 2022 accounting for 65.17 percent ($691.23 million) of total capital imported in Q4 2022.

“The government is implementing various policy reforms to attract capital inflows. These include the ease of doing business initiatives, improvements in the regulatory environment, and efforts to diversify the economy away from oil dependency.

“These reforms aim to create a more investor-friendly climate and enhance the attractiveness of Nigeria as an investment destination but the desired effects are yet to materialise,” it stated.