Big Boost for Naira As Nigeria’s Foreign Reserves Record First Gain in 5 Months

• The Central Bank of Nigeria's foreign reserves have recorded their first gain in more than five months
• This will come as a welcome development for the CBN as it fights to help the Naira recover in the foreign exchange market
• Forex supply has always been a major reason the Naira has come under intense pressure in both the black and official markets

Nigeria's foreign exchange (forex) reserves have recorded the first increase in five months, significantly boosting the Central Bank of Nigeria's fight to help naira recover its lost value.

In a statement published on its website, CBN reinstated its commitment to intervene in the foreign exchange markets to increase liquidity and ease demand pressure on Naira.

According to the Nation reports, forex reserves recorded a modest increase of $1.72 million over the weekend to close at $33.22 billion.

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The report added this is the first accretion since May 19, 2023.

The increase was due to the steady improvement in crude oil production and upbeat global oil prices.

Why are foreign reserves important?

Foreign reserves serve as a buffer to support the stability of the Nigerian currency in the international foreign exchange market.

When the CBN intervenes in the foreign exchange market, it uses its foreign reserves to influence the supply and demand of the Naira.

The foreign reserves also serve as a means to protect against external shocks and ensure the country's ability to meet its international obligations.

Trend in Nigerian foreign reserves

Nigeria's external reserves, which closed December 2022 at about $37.08 billion, had picked at $37.211 billion on January 16 2023.

It has since suffered a streak of extended losses, the latest being its five-month continuous decline since May.

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Here is a breakdown of Nigeria's foreign reserves movement at the end of each month in 2023:

Expert reacts

Paul Alaje, Partner and Senior Economist at SPM Professionals believes that the Nigerian external reserves have the potential to increase if the government implements certain changes.

First, he is advocating for the government to empower Small and Medium Enterprises (SMEs) that are export-oriented.

Secondly, he is urging the federal government to take action to curb illegal mining of Nigeria's solid minerals, especially gold.

He said:

"Nigeria is a land of milk and honey, the country has so much that we can earn the much-needed foreign exchange that is crumbling our nation and putting us on our knees because of our import dependence.

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"This will lead to expansion in terms of economic growth. It will also reduce unemployment, boost our foreign reserves, improve our trade balance, and many other things.

"Our foreign reserves never grew to $50bn in the last 12 years. But some monies would have gone straight into our reserves. About $59bn to $60bn, which should be in our reserves if only we were more organised, more purposeful, and determined."

Yemi Cardoso unveils his plans as CBN Governor, promises shift From Emefiele's Policies

Meanwhile, Legit.ng reported that Cardoso promised a policy shift in the future direction of the apex bank.

One of Cardoso's plans is to shift CBN's focus away from direct involvement in development finance initiatives, a hallmark of former Godwin Emefiele's leadership.

Source: Legit.ng