Information acquired from the Central Bank of Nigeria has revealed that Nigeria’s external reserves declined by $2.85 billion in the first half of 2023 due to external debt financing, among other issues.
The Punch reported that CBN said that as of the end of June 26, 2023, the foreign reserves, which started out at $37.07 billion in January 3, 2023, had decreased to $34.22 billion.
The reserves decreased by $3.43 billion in 2022, from $40.52 billion at the end of December 31, 2021, to $37.09 billion as of December 29, according to the CBN.
The former Governor of the Central Bank of Nigeria, Godwin Emefiele, stated at previous meetings of the Monetary Policy Committee that “the Committee, however, noted the marginal decline in the level of gross external reserves to $36.13bn in February 2023 from $36.4bn in January 2023, a decrease of 0.7 percent, reflecting the downtrend in crude oil prices, as global uncertainties persist.”
“The Committee, also, noted the moderate decline in the level of gross external reserves to $34.91bn in April 2023 from $35.14bn at the end-March 2023, attributable to transactions in the foreign exchange market and largely to minuscule accretion to reserves from crude oil exports,” he said.
Some members of the MPC spoke on the matter and this is what they had to say:
Adeola Adenikinju claimed that capital and current accounts were greater in Q3 2022 than in Q2 2022.
According to him, “Gross external reserves decreased by 0.7%, from $36.4 billion at the end of January 2022 to $36.13 billion at the end of February 2022. The increase in debt service payments and foreign exchange swap operations were responsible for this.
“In February 2023 (m-o-m), the FGN’s net fiscal operations led to an expanding fiscal deficit. The overall deficit increased from -N417.75 in January 2023 to -N539.01bn in February 2023.
“Both revenue and government spending decreased. FGN debt increased as a result of fresh borrowings to cover the budget deficit for 2022 and fresh loans from subnational governments.”
A different MPC member, Mike Obadan, stated that pressures on the foreign exchange market persist as persistent supply-demand imbalances.
“The external reserves position has remained weak against the backdrop of the country’s limited capacity to earn foreign exchange from both non-oil and oil exports,” he said.
He claimed that stability in the foreign exchange market and the exchange rate could be attained with the help of effective measures to combat oil theft and other problems, the start of local oil refining by the Dangote Refinery and Petrochemicals Company, the end of the infamous petrol subsidy regime, and other measures.
