Nigeria's Foreign Reserves Reach $39.12 Billion in October

Nigeria's Foreign Reserves Hit $39 Billion in October

“The current external reserves position can finance over 12 months of import of goods...”

Nigeria's inflation rate rises to 32.7% in September, CBN Governor Cardoso cites gradual moderation.

Nigeria's foreign reserves have surged to $39.12 billion as of October 11, marking a 12.74% growth in just four months, according to Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso. This significant increase is a welcome boost to the country's economy.

Central Bank of Nigeria (CBN) Governor, Yemi Cardoso, shared uplifting news about Nigeria's foreign reserves. Addressing the House of Representatives committee on banking regulation, Cardoso announced a 12.74% increase, reaching $39.12 billion as of October 11.

Previously, the reserves stood at $34.70 billion at the end of June. Notably, the reserves had dropped to $32.29 billion on April 15, the lowest in over six years. Cardoso attributed the significant growth to robust remittance flows, now accounting for 9.4% of total external reserves.

“The reserves rose by 12.74% to $39.12 billion as of October 11, 2024, from $34.70 billion at the end of June 2024,” he explained.

“In Q2 2024, we maintained a current account surplus and saw remarkable improvements in our trade balance.

“The current external reserves position can finance over 12 months of import of goods and services or 15 months of goods only.

“This is substantially higher than the prescribed international benchmark of 30 months, reflecting a robust buffer against external shocks.

“Regarding the foreign exchange market, the bank implemented various reforms including a unification strategy, which streamlined various exchange rate windows into a single model, adopting the willing buyer, willing Seller' approach to enhance FX liquidity and financial market stability.

“This move was aimed at fostering transparency, reducing market distortions, and enhancing the efficiency of foreign exchange allocations.

“This consolidation involved the implementation of new operational guidelines which included removing the international money transfer operators (IMTOS) quote cap.

“Additionally, the bank resumed the sales of FX at the NAFEM and Bureau De Change (BDC) segments, bolstered by an improved supply from foreign portfolio investors (FPIs).

“In the foreign exchange market, we have achieved increased transparency and improved overall supply. By allowing the foreign exchange rate to be determined by market demand and supply, the CBN has reduced arbitrage and speculative activities and eliminated the front- loading of FX demand.

“These policy measures have effectively narrowed the exchange rate disparities between the NAFEM and BDC segments which have largely led to the convergence of FX rates.

“Improved transparency in the market has restored market confidence leading to increased capital inflows which enabled the CBN to clear existing FX backlogs.

“The settlement of all legitimate backlogs of outstanding FX obligations by the bank has significantly improved Nigeria's credibility and ratings across the global financial market, helping to boost investor confidence, and enhanced liquidity in the foreign exchange market.

“With improved investor confidence, foreign investments have increased as evidenced by a significant rise in capital importation by 65.56% to $6.49 billion between January and July 2024, compared to $3.92 billion in the corresponding period of 2023.

“Collectively, these actions have contributed significantly to the stability of the financial system.”

Nigeria's inflation rate has taken a concerning turn, rising to 32.7% in September, according to the National Bureau of Statistics. This increase marks the first in three months, following declines in July and August. Central Bank of Nigeria (CBN) Governor, Yemi Cardoso, acknowledged the setback but remains optimistic, noting that inflation has shown gradual moderation due to effective monetary policy measures.

Factors Contributing to Inflation:

Depreciation of the Naira: A weakened currency has contributed to the inflation surge.

Transportation Costs: Increased fuel prices have led to higher transportation costs, affecting overall inflation.

Food Inflation: Severe floods in food-producing areas have driven food inflation up to 37.8%.

Despite these challenges, Cardoso emphasizes the positive impact of monetary policies on inflation moderation. The CBN continues to monitor the situation, adjusting policies to mitigate inflation's effects on the economy.