The Nigeria’s foreign reserves dropped by $1.57 billion in April 2024 as the Central Bank of Nigeria (CBN) sustained its intervention in the foreign exchange market.
The apex bank in its declared $32.25 billiion foreign reserves as of April 30, 2024, a decline of $1.57billlion from $33.828 billion it closed March 2024.
So far in 2024, foreign reserves have dropped by $657.9 million in first four months of 2024 to $32.25 biillion from $32.912 billion as it closed in 2023.
Amid CBN’s intervention, the local currency has dropped to N1,329.205 against the dollar when compared to N1329.76 against the dollar as of March ending 2024.
The CBN Governor, Olayemi Cardoso had said the shift in Nigeria’s foreign reserves has nothing to do with the apex bank’s defence of the local currency.
Cardoso explained that the movement of the reserves has nothing to do with the recent gains recorded by the Nigerian unit in the foreign exchange market, noting that the apex bank had no intention of defending the Naira.
“It is not in our intention to defend the naira, and much as I have read in the recent few days, some opinions concerning what is happening with our reserves and the CBN defending the naira.
“If you think back to what our overall policy and philosophy has been here, you can see it’s counterintuitive. The shift you see in the reserve has nothing to do with defending the naira, and that’s certainly not our objective,” he said.
He likened the shift to a common occurrence in any country’s reserve management, adding that such shifts often occur when debts are due or certain payments need to be made to maintain the country’s credibility.
He hinted at a future where CBN interventions would be uncommon, except in highly unusual circumstances.
“Basically what we are encouraging is for the market to have willing buyers and willing sellers for price discovery, and ultimately, I perceive a future where CBN will not need to intervene, except in very, very unusual circumstances,” Cardoso said.
Cardoso emphasised the need for a strong currency market, suggesting that CBN intervention might not be needed if there is enough liquidity in the Fx market.
The CBN in recent times has taken several measures to stabilise the FX market, regulate the activities of participants, and increase transparency in the markets.
The bank in March announced it had cleared all ‘valid’ foreign exchange backlogs majorly to restore confidence in the Nigerian economy.
The CBN also removed the +/- 2.5 percent rate on the NAFEX rate for International Money Transfer Organisations (IMTOs) and issued specific guidelines on IMTO services, including minimum capital requirements and prompt repatriation of export proceeds.
It equally directed all banks to stop the use of foreign currency as collateral for Naira loans and reviewed the Cash Reserve Ratio (CRR) framework.
Within the period, the local unit has appreciated significantly against the greenback and is rated one of the best-performing currencies around the world.
The appreciation in the value of the local unit, amounting to 12 per cent against the dollar in April and following a 14 per cent rise in March, is attributed to capital inflows, interest rate hikes, and the CBN’s market reforms.
