Nigeria’s external reserves have reached a 22-month high of $37.31 billion, driven by significant foreign inflows into the economy. According to data from the Central Bank of Nigeria (CBN), as of September 18, 2024, the reserves are at their highest level since November 4, 2022, when they were $37.36 billion. This marks a notable recovery in Nigeria’s foreign currency position.
The external reserves represent the country’s stock of foreign currency, crucial for meeting international financial obligations and stabilizing the local currency. However, despite this increase, the naira continues to struggle, being ranked among the 10 worst-performing currencies globally by Bloomberg on September 20.
Year-to-date, Nigeria’s reserves have surged by 12.99%, or $4.29 billion, from $33.02 billion at the start of the year on January 2, 2024. Compared to a year ago, the reserves have grown by 12%, adding $4.03 billion from the $33.28 billion recorded on September 18, 2023.
Several factors have contributed to this increase in external reserves. Key sources of inflow include the federal government’s domestic dollar bonds, which attracted foreign investment; remittances from Nigerians abroad; multilateral loans from international organizations; and foreign portfolio investments.
In recent efforts, the federal government raised over $900 million from investors through the issuance of a $500 million bond, part of a $2 billion domestic US dollar bond initiative aimed at stabilizing the economy. Additionally, the CBN reported $553 million in remittances from July 2023 to July 2024.
Other significant inflows included a $3.3 billion oil facility from AfreximBank and $2.25 billion from the World Bank Group. Overall, foreign exchange inflows surged by 57% year-on-year due to consistent policies from the CBN. Notably, in February 2024, the country recorded $8.86 billion in FX inflow, up from $5.66 billion in February 2023.
The CBN’s February 2024 economic report highlighted a substantial increase in new investments, totaling $1.24 billion compared to $0.33 billion in January 2024. Foreign direct investment rose to $0.06 billion from $0.03 billion, while portfolio investment climbed to $0.80 billion from $0.12 billion, driven by rising returns on money market instruments and bonds. Additionally, other investment capital, primarily loans, increased to $0.37 billion from $0.18 billion in the previous month.
