Nigeria’s foreign reserves hit $40bn, highest in three years

Nigeria’s foreign reserves has exceeded $40 billion, marking the highest level in nearly three years.

The Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, made the disclosure while speaking on the sideline of the just-concluded inaugural Conference on Emerging Markets Economies organised by the Ministry of Finance, Saudi Arabia, and the International Monetary Fund (IMF) Regional Office in Riyadh.

Governor Cardoso highlighted the adoption of an electronic matching system to improve transparency in the market and the introduction of a foreign exchange code of ethics, which all Nigerian banks signed to ensure adherence to market rules.

“As a result of these measures, the country’s foreign reserves had exceeded $40 billion,” he said.

Cardoso acknowledged that Nigeria had faced significant economic challenges, including capital flow exits, multiple exchange rate regimes, currency depreciation, high inflation, and a backlog of foreign exchange transactions, which led to a loss of confidence in the country’s currency.

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The CBN Governor cited reforms in the financial markets that addressed distortions in the Nigerian foreign exchange market, which had previously experienced a gap of up to 60% between the official and parallel market exchange rates.

He noted that due to consistent policy direction, improved market confidence, and enhanced transparency in forex trading, the gap has significantly narrowed to approximately 4-5%.

Upon assuming office, he stated that his team prioritised restoring confidence in the market by addressing the backlog of foreign exchange transactions and demonstrating a commitment to economic stability.

Cardoso emphasised that Nigeria implemented a tight monetary policy stance to tackle inflation and restore macroeconomic discipline.

Over the past year, he explained that the Bank raised interest rates by 850 basis points and shifted away from quasi-fiscal interventions that had distorted the economy.

He stressed that Nigeria’s approach had remained firmly rooted in orthodox monetary policies, a stance that was consistently communicated to market participants.

Another significant reform, he noted, was the removal of the fuel subsidy, which, along with multiple exchange rate inefficiencies, had cost the country approximately 6% of its Gross Domestic Product (GDP) annually.

He acknowledged that previous administrations had lacked the political will to remove the subsidy, but its elimination has had a profound positive impact on Nigeria’s fiscal outlook.

On financial sector reforms, he explained that the CBN had mandated banks to recapitalise to strengthen the financial system and build buffers to withstand future economic shocks.

He noted that these measures had so far proven successful in bolstering the sector.

The Star