As CBN Continues to Intervene in FX Market, Reserves Decline to Seven-year Low of $32.6bn

Nume Ekeghe

In the span of three weeks, the Central Bank of Nigeria (CBN) has initiated interventions in the foreign exchange market to stabilise the naira, resulting in Nigeria’s foreign reserves plummeting to a seven-year low of $32.6 billion as of April 12, 2024.

This is according to data released by the central bank regarding the movement of Nigeria’s reserves.

Analysis of the CBN data revealed that the last time reserves reached such levels was on September 29, 2017, when it stood at $32.49 billion. 

The CBN’s strategy which has aided the naira strengthen to N1000/$1 at the parallel market and it hovering around N1,130/$1 at the official window includes resuming sales to Bureau de Change operators at discounted rates to boost market liquidity and intervening in the official window.

The trajectory of reserves has been fluctuating, with foreign reserves reaching a significant four-month high of $33.45 billion as of February 21, 2024. However, this momentum has since reversed.

A one-month in-depth look showed that from April 12, 2024, Nigeria’s foreign exchange reserves stood at $32.61 billion, marking the lowest level in seven years. This figure reflects a continued downward trend in the country’s reserve holdings, which have been subject to ongoing fluctuations and declines in recent months.

Before this, on April 8, 2024, the reserves stood at $33.04 billion, indicating a further decrease from previous levels and at April 5, 2024, Nigeria’s foreign exchange reserves reached $33.36 billion.

This trend continued into early April, with the reserves standing at $33.5 billion on April 3, 2024.

Furthermore, on March 26, 2024, the reserves had further declined to $33.95 billion highlighting ongoing fluctuations. However, this upward trend was short-lived, as the reserves decreased once again to $34.38 billion on March 19, 2024 March 18, 2024, the reserves stood at $34.44 billion, showing a slight recovery from earlier position.

As the month progressed, the reserves continued to fluctuate, by March 15, 2024, the reserves had decreased to $34.19 billion indicating on-going volatility and however continued upward trend as it recorded $34.37 billion on March 12, 2024.

However, considering the upcoming Afreximbank loan and recent hikes in the monetary policy rate, which have drawn foreign portfolio investors’ interest, along with the spike in crude oil prices, it is expected that the reserves will experience a notable increase in the coming weeks.