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Tag: Foreign reserves

  • JUST IN: Foreign reserves hit $46.7bn 

    JUST IN: Foreign reserves hit $46.7bn 

    …as CBN marks 20 years of monetary policy department

    Nigeria’s external reserves have risen to $46.7 billion as of November 14, 2025, providing 10.3 months of import cover in goods and services.

    The Central Bank of Nigeria (CBN) attributed the growth to steady inflows and renewed investor participation across different asset classes.

    CBN Governor, Mr. Olayemi Cardoso, represented by the Deputy Governor, Economic Policy Directorate, Mr. Muhammad Sani Abdullahi, disclosed this at a colloquium marking the 20th anniversary of the Bank’s Monetary Policy Department (MPD).

    He said the increase in reserves “reflects investor confidence in our policies leading to improved oil receipts, stronger balance of payments, and renewed foreign portfolio inflows.”

    Cardoso linked the rising confidence to recent upgrades of Nigeria’s sovereign outlook by the three leading international ratings agencies, including S&P Global Ratings, which recently revised Nigeria’s outlook from stable to positive. According to him, the upgrade “reflects the impact of sustained reforms that have placed our economy on a more resilient path.”

    He also noted that Nigeria’s removal from the Financial Action Task Force (FATF) Grey List marked “another significant milestone in restoring international confidence in our financial system.”

    Cardoso stated that the development shows “our full alignment with global standards on anti-money laundering and counter-terrorism financing,” adding that it opens more opportunities for foreign investment and trade finance.

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    The CBN Governor said the combination of these developments has strengthened the currency, boosted trade balances and provided a firmer base for inclusive growth.

    Speaking on the role of the MPD, Cardoso described the Department as central to the Bank’s policy architecture. He noted that it supports the Monetary Policy Committee (MPC) and the Monetary Policy Technical Committee (MPTC) with research, analysis and coordination to ensure coherence in decision-making.

    A major task ahead, he said, is the Bank’s transition to a full inflation-targeting regime. Cardoso stressed that the shift is “a strategic imperative for anchoring expectations and sustaining price stability.” He added that inflation targeting will promote transparency, boost credibility and improve how monetary policy decisions transmit through the economy.

    Cardoso urged MPD staff to remain focused on the bigger national goal. “Remember that our ultimate goal extends beyond technical achievements. It is about building a resilient economy that fosters growth, creates jobs, and delivers shared prosperity. Monetary policy must remain credible, coherent, and adaptive to changing realities,” he said.

    He further encouraged them to maintain high standards. “The journey ahead requires even greater commitment, creativity, and collaboration. Continue to innovate, continue to strengthen coordination, and continue to uphold the highest standards of professionalism,” he said.

    Director of the Monetary Policy Department, Dr. Victor Oboh, in his address, traced the evolution of the department from its early team-based structure to a modern system built around five specialized divisions covering macroeconomic analysis, monetary policy, committee coordination, international economic relations and policy research. He said the department has consistently produced experts who have served as special advisers and directors to successive CBN governors.

    Oboh noted that the department has grown into a strategic centre of the Bank’s policy framework, supporting the MPC with high-level research and analysis that aligns Nigeria’s policy decisions with global standards. He recalled key historical moments—such as the global financial crisis, commodity price shocks and the COVID-19 pandemic—where MPD’s capacity “proved its resilience and relevance.”

    The MPD Director further explained that Nigeria’s gradual migration toward inflation targeting followed lessons from global and domestic crises. According to him, the CBN moved from an exchange rate targeting framework to monetary targeting, before adopting a hybrid model that integrates elements of inflation targeting.

    Oboh said the Bank has made significant progress since announcing its decision to adopt inflation targeting in late 2023. “We have pursued a disciplined monetary policy stance, hosted high-level monetary policy forums to deepen dialogue on disinflation, and strengthened policy communication to anchor expectations,” he said.

    He added that these efforts have helped moderate inflation, stabilize the foreign exchange market, reduce exchange rate gaps, and increase external reserves to more than $46 billion. “Today, we stand at an advanced stage of this phased migration, integrating elements of inflation targeting into our hybrid framework while laying the foundation for a credible, forward-looking regime that will restore price stability and further strengthen investor confidence,” Oboh stated.

    Reflecting on the theme of the anniversary, “Monetary Policy in Nigeria: Past, Present and Future,” Oboh described it as a moment for reflection and projection. He said the MPD’s work over two decades has strengthened credibility, supported transparency, and sustained public confidence in monetary policy.

    Looking ahead, he noted that the future of monetary policy would require even greater innovation and coordination. Oboh pointed out that global fragmentation, digital currencies such as stablecoins, and climate-related financial risks will demand that MPD remains agile, data-driven, and forward-looking.

  • Foreign reserves boost

    Foreign reserves boost

    •Proof that govt’s policies are working; it should stay the course

    It is exactly two years ago that the global financial service firm, JP Morgan, announced to the world that contrary to the $33.8 billion bandied by the Central Bank of Nigeria (CBN) as representing the country’s foreign exchange reserve as of August 17, 2023, the actual figure was barely $3.7 billion (less than one-tenth of the amount).

    The global firm had based its calculation on the large currency swaps and borrowings against the forex reserve, to wit: the “forex forwards ($6.84 billion), securities lending ($5.5 billion) and currency swaps ($21.3 billion).

    The firm’s grim summary was: “Based on partial information from the audited financial accounts, we estimate that CBN’s net forex reserves were around $3.7 billion at the end of last year, from $14 billion at the end-2021.”

    Two years after, the story is one of a remarkable turnaround.  In fact, all things considered, things could be said to be steadily looking up.

    On Tuesday, last week, the announcement came from the CBN that the reserves actually climbed to $41 billion, its highest level in 44 months – an amount sufficient to cover 10 months of imports.

    However, if the growth, to use the words of this newspaper, ‘has been particularly strong this month, with reserves rising by $1.46 billion from $39.54 billion on August 1 to $41 billion on August 19, (a 3.69 per cent increase in less than three weeks, with an average daily growth of $81 million)’, the accretion rate has also been somewhat steady, if not phenomenal.

    ‘Inflows’, it observed, ‘are consistently exceeding outflows, a major boost for investor confidence. Combined with declining inflation and a drop in commodities prices, it signals that economic reforms are beginning to yield results”.

    Considering how far the Bola Tinubu administration has come, the above, surely is no mean feat.

    More than that, however, it goes to show that the apex bank’s projection of building the external reserves to at least $100 billion to further strengthen the economy and remove the perception of fragility that has trailed Nigeria’s external accounts is no fluke.

    Of course, a no less important part of the story is the clearing of the outstanding $7bn foreign exchange obligations earlier in the year – an initiative, which the CBN governor said ‘has restored confidence among market participants and reinforced Nigeria’s commitment to honouring financial obligations in a timely and efficient manner’.

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    To the extent that the achievement is a reflection of improved foreign exchange inflows, stronger oil revenues and reduced import demand, it seems inexorable that greater credit would devolve to the reforms instituted by the Tinubu-led Federal Government.

    Surely, there is a lot that the government and the CBN are doing right and so must keep doing to boost the health of the economy. One of these is the steady ramp up in oil production. In July, for instance, crude oil production reportedly surged past 1.8 million barrels per day (mbpd), surpassing its Organisation of Petroleum Exporting Countries (OPEC) quota of 1.5 mbpd for the first time in months. With output currently averaging 1.78 million barrels per day, the task facing government comes basically to ensuring that nothing is allowed to hamper the trajectory.

    And, given the Federal Government’s initial 2.3 million per day production target by mid-2025, Nigerians expect to see this target realised as soon as possible.

    The other is the current path of aggressive promotion of the non-oil sector. This is also another major area that needs to be sustained.

    Indeed, with the sector recording a remarkable surge of $3.225bn in the first half of 2025, a 19.59 per cent increase over the $2.696bn recorded for the same period of 2024; and with the number of exports jumping from 202 to 236 – a 16.83 per cent increase, also for the corresponding period, the government’s decisive goal of macro-economic stabilisation will appear not only within reach, but firmly on course.

    We urge it to stay the course.

  • Foreign reserves gained $900m in three days

    Foreign reserves gained $900m in three days

    The gross foreign reserves have recorded further accretion, adding $900 million in three days to $41.19 billion as at August 25.

    The reserves, which closed at $41.10 billion on August 22, jumped to $41.19 billion on August 25.

    The reserves status represents estimated $900 million inflows in three days- between August 22 and August 25.

    The current upbeat shows the reserves have continued to rise, and is expected to also support naira stability.

    The CBN Governor, Olayemi Cardoso said the reserves, which are currently at four-year high, could provide up to 10 months cover for imports.

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    The naira also closed at N1,542 to dollar at the parallel market, stronger than N1,550 to dollar it closed last week. At the official market, the naira exchanged at N1,535 to dollar, stronger than N1,540 to dollar at the start of last week.

    According to data from the Central Bank of Nigeria (CBN) reserves movement chart, the gross foreign reserves stood at $41.07 billion on August 21.

    The reserves earlier hit $40.72 billion on August 13, driven largely by rising forex inflows and marginal increase in crude oil output.

    According to the apex bank, the gross reserves moving average stood at $39.3 billion on August 1, and reached $39.5 billion on August 6, and hit $40.2 billion on August 8.

    The sustained reserves accretion, decline in inflation rate, commodities prices dip as well as long-term naira stability are all positive fallout of the ongoing economic reforms instituted by the federal government.

    Aside the reserves, the naira has also seen sustained stability while the inflation rate has continued to decline, closing July at 21.88 per cent.

    Part of the reserves accretion was triggered by the FX reforms, instituted by the Olayemi Cardoso-led CBN, new policies instituted by the Federal Government to boost local production, reduce forex demand pressure, and lessen domestic prices have been instrumental to macroeconomic stability.

    The expectations are that the apex bank sustains the forex reforms while the fiscal authority strengthens efforts at enhancing FX earnings, especially from gas, oil and non-oil exports.

    President, Association of Bureaux De Change Operators of Nigeria, Dr. Aminu Gwadabe, said the apex bank under Cardoso has been cultivating multiple FX sources to increase dollar inflows, boost dollar access to manufacturers and retail end users.

     “From moves to improve diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorized dealers and other players in the value chain,” he said.

  • Foreign reserves rise to $38.10b on policy reforms activation

    Foreign reserves rise to $38.10b on policy reforms activation

    The gross foreign exchange (forex) reserves increased for the second consecutive week, growing by $86.67 million $38.10 billion following strong measures instituted by the Central Bank of Nigeria (CBN) to attract more inflows to the economy, data from the CBN has shown.

    Analysts said stronger forex reserves are expected to bolster the CBN’s capacity to manage excess naira volatility through sustained market interventions and achieve long-term stability of the exchange rate.

    Already, the Central Bank of Nigeria (CBN) is cultivating multiple FX sources to increase dollar inflows, boost dollar access to manufacturers and retail end users.

    From moves to improve diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorized dealers and other players in the value chain.

    The move has led to substantial accretion to the gross FX reserves and supported the stability of the naira. For instance, the gross FX reserves increased for the second consecutive week, growing by $86.67 million $38.10 billion. The current reserves position could provide nearly 10 months of import cover and support the country’s drive for stronger economy.

    Given that FX inflows to the economy are strategic in achieving monetary and fiscal policy stability, the CBN under its Governor, Olayemi Cardoso puts in a lot of efforts in attracting more inflows into the economy.

    Diaspora remittances to Nigeria, estimated at $23 billion annually remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.

    The CBN‘s initiatives have supported continued growth in these inflows, aligning with the institution‘s objective of doubling formal remittance receipts within a year.

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    The remittances in the economy is expected to increase based on  CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth.

    Director of Trading at Verto, Charlie Bird, said dollar liquidity dynamic is now more balanced, with foreign investors and airlines able to repatriate funds.

    Speaking during Cordros Asset Management seminar titled: “The Naira Playbook”, he said Nigeria is now  darling of foreign investors because of improved dollar liquidity in the economy due to positive CBN’s reforms.

    For instance, the CBN under Cardoso, recently announced the introduction of two new financial products designed to serve Nigerians living abroad and attract more diaspora remittances.

    These and other measures, including the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and enabling timely access to naira liquidity for International Money Transfer Operators (IMTOs).

    The CBN recently released the reviewed guidelines of International Money Transfer Services in Nigeria. These Guidelines mark a significant shift in how IMTOS conduct their operations, reflecting the CBN‘s ongoing efforts to enhance transparency and efficiency in foreign exchange transactions and to bolster diaspora remittances into Nigeria.

    Further circular titled „New Measures to Enhance Local Currency Liquidity for Settlement of Diaspora Remittances“ highlighted the apex bank’s commitment to improving the Nigerian foreign exchange market infrastructure by increasing the flow of remittances through formal channels.

    It introduces measures aimed at providing licensed IMTOs with access to Naira liquidity from the CBN, facilitating the disbursement of remittances to beneficiaries.

    As part of its efforts to boost diaspora remittances and support naira stability, the CBN recently announced the introduction of two new financial products designed to serve Nigerians living abroad.

    The Non-Resident Nigerian Ordinary Account and the Non-Resident Nigerian Investment Account was created to streamline remittances, encourage investments, and foster financial inclusion among Nigerians in the diaspora.

  • Foreign Reserves’ $40.08b highest in three years

    Foreign Reserves’ $40.08b highest in three years

    Nigeria’s foreign exchange (forex) reserves crossed a new threshold at the weekend.

    It rode on the back of a sustained 10-week accretion to $40.08 billion – the highest in nearly three years.

    Data from the Central Bank of Nigeria (CBN) at the weekend showed that forex reserves crossed the $40 billion mark to $40.08 billion, its highest level in 35 months.

    The level was attained despite clearance of $7 billion forex backlog by the CBN.

    The reserves rose last week by $270 million, its 10th consecutive weekly increase.

    At $40.08 billion, the forex reserves have risen by about $7.17 billion so far this year. The nation’s forex reserves had ended 2023 at $32.912 billion.

    The sustained build-up came amidst growing confidence in government’s macroeconomic reforms, underpinned by market-driven, increasingly transparent forex transactions.

    Latest report on the Nigerian Autonomous Foreign Exchange Market (NAFEM) showed that total inflows have risen by 40.2 per cent to a five-month high of $3.04 billion as foreign investors stepped up demand for Nigerian assets.

    The report showed that the positive overall performance of inflows was driven mainly by increases in foreign portfolio and direct investments.

    Data, obtained from the FMDQ Securities Exchange, indicated that total inflows into NAFEM rose from $2.17 billion in September 2024 to $3.04 billion in October 2024, an increase of 40 per cent and its highest figure in five months.

    The increase was driven broadly by stronger inflows from foreign sources, compared to declines in domestic sources.

    Inflows from foreign sources rose by 292.7 per cent from $345.50 million in September 2024 to $1.37 billion in October 2024, representing 44.6 per cent of total inflows during the period and the highest level in seven months.

    Inflows from foreign portfolio investors (FPIs) had grown by 510.9 per cent, underlining the increasing participation of foreign investors in the Nigerian market. Inflows from foreign direct investments (FDIs) were also considerably high, rising by 44.6 per cent during the period.

    The increase has been attributed partly to purchases from foreign portfolio investors, who are currently trading at their highest turnover in five years.

    The Nation had reported more than a double in foreign transactions and sustained upbeat by domestic investors, which pushed total transactions at the Nigerian stock market to its highest level by the third quarter 2024.

    Official trading report at the Nigerian Exchange (NGX) had shown that total transactions at the stock market rose to N3.97 trillion in the first nine months of this year, the highest third quarter turnover according to available official records of the market.

    The 2024 performance represented a new record against the market’s turnover in third quarter 2023, when the market had set a high of N2.71 trillion.

    The closest records were in 2018 and 2014 when the market recorded N2.01 trillion and N2.04 trillion respectively.

    The latest report also showed almost a double in the participation of FPIs in the Nigerian market, a situation that analysts attributed to the attractiveness of the Nigerian stocks and the relative liquidity occasioned by foreign exchange (forex) reforms.

    The proportion of participation by FPIs increased from 9.51 per cent in third quarter 2023 to 17.56 per cent in third quarter 2024, the highest in the past three years.

    Total foreign transactions at the NGX grew by 170.1 per cent from N258.02 billion in third quarter 2023 to N696.88 billion in third quarter 2024, the highest in six years.

    While forex differential contributed to FPIs turnover, domestic investors have also shown sustained strong appetite for quoted equities with a turnover of N3.27 trillion in the last quarter, higher than total transactions in previous years of the market. Total domestic transactions had stood at N2.45 trillion in the third quarter of last year.

    However, the increasing participation of foreign investors has reduced the proportion of domestic investors’ participation from 90.49 per cent in third quarter 2023 to 82.44 per cent in third quarter 2024.

    Read Also: Foreign reserves upbeat at $38.4b

    Experts attributed the upbeat at the stock market to the increasing attractiveness of the Nigerian market to foreign investors, ongoing economic reforms, resilient earnings by Nigerian companies, exchange rate differential, ongoing banking recapitalisation and the reform in the oil sector.

    Analysts at Cordros Capital at the weekend said the country has potential to outperform International Monetary Fund (IMF)’s projection of 2.9 per cent growth in 2023.

    In the October edition of its World Economic Outlook (WEO), IMF lowered Nigeria’s growth projection to 2.9 per cent (20 basis points lower than July forecast of 3.1 per cent).

    The revised growth forecast primarily reflected concerns about the weaker-than-expected economic activity in first half 2024, particularly in the agricultural and oil sectors, as flooding and security issues affected production.

    Analysts at Cordros Capital said while they aligned with the IMF on Nigeria’s growth outlook, they expected the economy to outperform the IMF projection at 3.00 per cent.

    “Specifically, while ongoing currency pressures, elevated energy costs, and restrictive financial conditions are likely to weigh on economic activity in the non-oil sector, we anticipate a boost from the oil sector due to higher domestic oil production,” Cordros Capital stated.

  • Foreign reserves upbeat at $38.4b

    Foreign reserves upbeat at $38.4b

    • New forex policy to reinforce trust, says Cardoso

    The foreign reserves recorded significant accretion in September, closing at  $38.4 billion month-on-month (m/m) despite decline in average Brent crude oil price. There was also turnover surge in the forex market within the month, with activity level rising 16.1 per cent m/m to $4.7 billion.

    Despite risks of retaliatory Israeli attack on Iran’s oil facilities amid escalating regional tensions, the average Brent crude oil price fell 17.3 per cent m/m to $71.70/bbl, in September.

    The drop in prices was primarily driven by Saudi Arabia’s plans to raise production and jettison its unofficial price target of $100.0/bbl for crude.

    Also, concerns over a potential Israeli attack on Iran’s oil facilities and the rising geo-political tensions in the Middle East attributed to heightening risk of supply disruptions from the OPEC producer. As a result of these factors, the average Brent crude oil price fell 17.3 per cent m/m to $71.70/bbl.

    Analysts at Afrinvest West Africa, disclosed that in the currency market, the performance of the naira varied. Specifically, in September, the naira gained 3.7 per cent against the dollar to N1,541.90 per dollar at the NAFEM window while it dipped 3.6 per cent at the parallel market to close at N1,680.00 per dollar.

    The analysts said: “We expect that the Naira would trade at similar bands this month barring any shocks”.

    The foreign reserves increased for the fourth consecutive time (last week of September) by $310.75 million week-on-week (w/w) to $37.78 billion.

    The uptick in foreign reserves at a period of crude oil prices decline speaks to the gradual surge in foreign capital inflows and pick up in investors’ confidence in the economy.

    Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, listed the impact of Fed’s rate cut on Nigeria, including possibility of increased capital inflows into the country, where higher returns may be available. This is expected to lead to short-term appreciation of the naira.

    The move is also expected to stimulate global demand and economic activity, as oil prices could rise, benefiting Nigeria’s export earnings.

    According to Rewane, Fed’s rate cut would ease imported inflation in Nigeria as the dollar weakens in tandem with the interest rate reduction and lower the cost of borrowing as US dollar-denominated debt cheapens

    He advised the CBN to sustain dollar interventions to keep the naira gaining against global currencies.

    In a bid to enhance liquidity and reduce distortions in the foreign exchange (FX) market, the CBN introduced a market unification framework that streamlines the FX market. This initiative has simplified transactions and reduced the fragmentation that previously hampered market operations.

    Additionally, the CBN made significant progress by clearing a $7 billion backlog of valid FX forwards, a move that stabilised the exchange rate and bolstered market confidence.

    Analysts said the improvement in foreign reserves position has contributed to reduced FX volatility and reinforced confidence in Nigeria’s exchange rate management.

    Foreign reserves have over the years, been impacted by crude oil production and prices.

    Meanwhile, Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, has said that the bank’s decision to implement the Electronic Foreign Exchange Matching System (EFEMS) policy is to provide accurate transactions oversight.

    Addressing members of the Harvard Club of Nigeria in Lagos at the weekend on the topic: “Leadership in Challenging Times: Restoring Credibility, Building Trust, and Containing Inflation,” Cardoso said that policy reinforces the understanding that trust is essential to central banking.

    He reiterated that the CBN’s move was to enhance transparency and provide more accurate oversight of foreign exchange transactions.

    According to him, “Trust is the currency of central banking. If the public loses trust in the institution, the efficacy of its policies diminishes. Our decision to implement the Electronic Foreign Exchange Matching System (EFEMS) is rooted in this understanding.

     “By enhancing transparency and providing more accurate oversight of forex transactions, we send a strong signal that the CBN is serious about fair and efficient markets,” he added.

    Cardoso, who marks one year in office as CBN Governor, this week, told his audience that leadership, especially as the head of a central bank, often requires making difficult and sometimes unpopular decisions. He emphasised that the Bank is a listening institution, unafraid to reconsider decisions if they fail to meet its original objectives.

     “In the face of economic challenges, it is imperative to focus on core objectives—restoring the credibility of the institution, building trust in the financial system, and, most critically, containing inflation. These are not just strategic goals; they are foundational to any meaningful recovery,” he said.

    Speaking on his journey on the saddle, Mr. Cardoso recalled that upon assumption of duty, he understood that the credibility of the Central Bank of Nigeria (CBN) had to be the bedrock of the actions he and his team took.

    He said: “Without credibility, no policy, however well-intentioned, can succeed. Floating the naira, a decision met with considerable public criticism, was necessary to bring the official exchange rate closer to market reality. The disparity between the official and parallel rates had encouraged arbitrage and speculation, eroding trust in the market.

     “Credibility is earned by consistency. The decision to close this gap, while painful in the short term, sent a message to market participants that the CBN was committed to transparency and sound monetary policy,” he added, noting that speculative trading had been reduced, and stability was gradually returning to the currency markets.

    While noting that containing inflation remained the Bank’s core mission, he acknowledged that the CBN was yet to meet its target. However, he stressed that recent declines reported by the National Bureau of Statistics (NBS) in July and August 2024 showed that the CBN was moving in the right direction.

    Read Also: Foreign reserves post fourth-week gain to $37.7b

    He explained: “Our decision to raise the Monetary Policy Rate (MPR) to 27.25% was a bold move. Higher interest rates, while painful for borrowers, are necessary to curb excess money in circulation and control inflation. Leadership is about making hard choices to secure long-term stability over short-term comfort in moments like these.

    Highlighting key leadership lessons, Cardoso said: “Leading through challenging times means avoiding the temptation to take on too many initiatives. The Central Bank must focus on its core mandate—price stability. It is easy to become distracted by various political and economic pressures, but as a leader, one must prioritise.

     “Effective communication is as important as the right policy. Clear and open communication fosters trust. From publishing the results of the Dutch Auction to ensuring regular updates on economic data, transparency has been our guiding principle. Trust is built on the belief that a central bank will take the necessary steps to ensure economic stability, even when those steps are uncomfortable or politically contentious,” he declared.

  • Foreign reserves post fourth-week gain to $37.7b

    Foreign reserves post fourth-week gain to $37.7b

    The foreign reserves increased for the fourth consecutive time last week by $310.75 million week-on-week (w/w) to $37.78 billion.

    The uptick in foreign reserves at a period of crude oil prices decline speaks to the gradual surge in foreign capital inflows and pick up in investors’ confidence in the economy.

    The foreign reserves accretion equally had a positive effect on the naira exchange rates at both official and parallel markets.

    Market insights from at Cordros Securities explained that the Central Bank of Nigeria (CBN’s) consistent effort to support the naira including $89 million intervention through the Bureaux De Change (BDCs) last week caused the naira to settle at N1,540.78/$ (+5bps w/w) at the Nigerian Autonomous Foreign Exchange Market (NAFEM)- official market.

    Total turnover at the NAFEM as of 26 September increased by 3.7 per cent with trades consummated within the N1,540.00/$ to N1,699/$ band.

    In the forwards market, the naira rates decreased across the 1-month (-2.7 per cent to N1,684.53/$), 3-month (-2.6 per cent to N1,721.12/$), 6-month (-2.0 per cent to N1,849.07/$) and 1-year (-1.5 per cent to N2,051.10/$) contract.

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    At the parallel market, naira recorded its first gain to close at N1,690/$ after the Monetary Policy Committee (MPC) decision to hike the interest rate by 50 basis points and liquidity injection through the BDCs.

    The local currency appreciated by 0.59 per cent from N1,705 it closed last Wednesday, a day after the MPC rate hike. The BDCs which had been starved of forex were supplied $20,000 each on Thursday.

    Head of Research at Commercio Partners, Ifeanyi Uba, said oil prices experienced a sharp decline, with Brent and West Texas Intermediate crude falling over two per cent due to easing supply concerns from Libya and weakening demand forecasts, despite China’s recent stimulus efforts.

    “While falling U.S. crude inventories and tensions in the Middle East provided some support, reports of Saudi Arabia planning to unwind voluntary production cuts in December further pressured prices. This move by Saudi Arabia is seen as an attempt to regain market share, abandoning its $100 price target. Analysts remain concerned about weak demand, with Wall Street forecasts lowering expectations for crude prices in the coming months,” he said.

    Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, advised the CBN to sustain dollar interventions to keep the naira gaining against global currencies.

    In a bid to enhance liquidity and reduce distortions in the foreign exchange (FX) market, the CBN introduced a market unification framework that streamlines the FX market. This initiative has simplified transactions and reduced the fragmentation that previously hampered market operations.

    Additionally, the CBN made significant progress by clearing a $7 billion backlog of valid FX forwards, a move that stabilized the exchange rate and bolstered market confidence.

    Analysts said the improvement in foreign reserves position has contributed to reduced FX volatility and reinforced confidence in Nigeria’s exchange rate management.

    Foreign reserves have over the years, been impacted by crude oil production and prices.

    In September 2008, the country’s foreign exchange reserves hit $62 billion, with the Federal Government spending $12 billion from it to settle external debts.

    The reserves stood at $40 billion in $40 billion in January 2014 and $40.4 billion in December 2017.

    The reserves rose again to $45 billion in July 2019 before it started dropping  to present position, with intermittent rise and fall within the band.

  • Foreign reserves hit nine-month high amid economic optimism

    Foreign reserves hit nine-month high amid economic optimism

    • Buildup positive multipliers

    Nigeria’s foreign exchange (forex) reserves rose to its highest point in nine months at the weekend amid growing optimism that ongoing reforms by fiscal and monetary authorities would support a stable forex management and price stability.

    Total external reserves, which have risen consecutively over the past one month, rose by about $209.9 million to close weekend at $34.416 billion, its highest in nine months. The previous recent highest level was $34.449 billion on June 20, 2023.

    The nation’s forex reserves have risen by $1.50 billion so far this year in a steady build-up that has eased volatility in the currency market and reinforced monetary reforms.The reserves had closed 2023 at $32.912 billion.

    Experts agreed that the steady recovery in forex reserves has several positive implications for the economy.

    “The naira will appreciate in the forex market. The exchange rate will stabilise. Inflation rate is most likely to moderate given the exchange rate pass-through to commodity prices,” President, Association of Capital Market Academics in Nigeria, Prof Uche Uwaleke, said.

    Data by the Central Bank of Nigeria (CBN) indicated average crude oil price at $88.84 per barrel. Global reports showed that benchmark Brent crude rose by 3.2 per cent to close weekend at about $84.71 per barrel.

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    With the lingering crises in Middle East and Eastern Europe amid elevated oil demand, most analysts expected crude oil price to remain substantially above Nigeria’s budget benchmark of $77.96 per barrel.

    The International Energy Agency (IEA), in its latest report, increased its global crude oil demand projection for 2024 by 1.3 million barrels per day (mbpd) to 103.2mbpd. IEA estimated that extended output cuts by Organisation of the Petroleum Exporting Countries (OPEC) and its affiliates (OPEC+) would continue to moderate supply output, keeping off any major downside volatility.

    OPEC+ members had two weeks ago extended their voluntary production cuts of 2.2mbpd into the second quarter of 2024, with expectation of further extension beyond the first half.

    Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, last week indicated that the country’s oil production has risen to 1.65mbpd, from some 1.25mbpd in June 2023.

    OPEC had recently reported that Nigeria’s crude oil production rose to 1.476 mbpd in February 2024, an increase of 47,000 barrels on 1.429 mbpd recorded in January 2024. The data was based on secondary market intelligence sources surveyed by the organisation.

    “According to secondary sources, total OPEC-12 crude oil production averaged 26.57 mb/d in February 2024, 203 tb/d higher, mo- m. Crude oil output increased mainly in Libya and Nigeria, while production in IR Iran and Iraq decreased,” OPEC stated in its Monthly Oil Market Report.

    The Federal Government’s N28.78 trillion 2024 budget is premised on 1.78mbpd daily oil production, $77.96 oil benchmark price, exchange rate of N800 per dollar and GDP growth rate of 3.88 per cent.

    Oil sector and currency management reforms are two of President Bola Tinubu’s administration’s economic blueprint. A multi-stakeholders reform agenda involving the Ministry of Finance, security services, Nigerian National Petroleum Company Limited and the CBN has seen a steady improvement in crude oil management and accountability. 

    In its latest macroeconomic assessment report, the International Monetary Fund (IMF) had sounded upbeat on the Nigeria’s macroeconomic reforms citing the improvement in oil production, ongoing efforts to boost food production and social welfare programmes among others.

    Governor, Central Bank of Nigeria (CBN), Dr Olayemi Cardoso, has outlined that ongoing efforts to strengthen the country’s forex position would lead to increased stability in forex reserves and naira. 

    According to him, the collaboration with Ministry of Finance and the NNPCL to ensure that all forex inflows are returned to the CBN will greatly enhance forex flows and contribute to the accretion of reserves.

    “The expected stability in the foreign exchange market for 2024 can be attributed to the reduction in petroleum product imports and the recent implementation of a market-determined exchange rate policy by the CBN. This reform is designed to streamline and unify multiple exchange rates, fostering transparency and reducing opportunities for arbitrage. The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors.

    “We are implementing a comprehensive strategy to improve liquidity in our forex markets in the short, medium, and long term. Our focus is on addressing fundamental issues that have hindered the effective operation of our markets over the years,” Cardoso said.

    He pointed out that the apex bank understands that upholding the integrity of financial markets is crucial for building confidence, thus it remains committed to decisively address any infractions and abuses.

    He noted that in efforts to stabilise the exchange rate, the CBN prioritises transparency and a market environment that enables the fair determination of exchange rates, ensuring stability for businesses and individuals alike.

    “We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term. This coordinated approach will contribute to a more balanced and stable exchange rate,” Cardoso said.

    Finance and economy experts were unanimous that the buildup in external reserves was a good indication for the country’s currency management and macroeconomic stability.

    Analysts expected that changes in forex management rules, steady improvement in crude oil production and upbeat in global oil price could help the country mitigate its volatile forex situation.

    Managing Director, Arthur Steven Asset Management, Mr. Olatunde Amolegbe, said the continuing increase in forex reserves will support government’s current efforts aimed at fostering liquidity and stability at the forex market.

    “The increase is a positive signal for improved liquidity in the forex market. This should ultimately help to stabilize the exchange rate of the naira or even strengthen it against the dollar if the increase is steady and consistent,” Amolegbe said.

    Uwaleke said any increase places the CBN in a stronger position to meet forex obligations as well as intervene in the forex market.

    “If this development is sustained, we are likely to witness an appreciation of the naira in the forex market and more stability in the exchange rate following improved liquidity. This is one positive development capable of keeping away destructive speculators from the forex market,” Uwaleke said.

    He explained that the increase could be due to increase in oil revenue as a result of the rise in crude oil price and the recent increase in crude oil production.

    He added that the external reserves could also increase if the government has received any of the concessional loans it has negotiated with the World Bank.

    Uwaleke however said Nigeria needs to curb excessive import dependence to support its forex recovery.

    “It goes without saying that export- base diversification remains the only sustainable solution to the present forex crisis,” Uwaleke said.

    According to him, to curb the demand pressure, government should compel a change in consumption behaviour by enacting a ‘Buy Nigeria law’ akin to the ‘Buy America Act’ of 1933 and recently the ‘Build America, Buy America Act’ of 2021.

    “Also, Nigeria’s import data support revisiting and scaling up the CBN’s currency swap deal with the Peoples Bank of China. Given that the bulk of Nigeria’s imports are from China, it stands to reason, therefore, to explore ways of bypassing the dollars and settling these transactions in the Yuan. This was the idea behind the currency swap with China which was largely inadequate in size. In order to increase the stock of Yuan in our external reserves, Nigeria can issue panda bonds, which are bonds denominated in the Chinese Yuan and are considered cheaper than Eurobonds,” Uwaleke said.

  • $2.5b currency swap deal to boost foreign reserves

    The $2.5 billion bilateral currency swap agreement between the Central Bank of Nigeria (CBN) and Peoples Bank of China (PBoC) is expected to boost foreign reserves, Chief Economist at Renaissance Capital (RenCap) Charles Robertson has said.

    Speaking during the investors’ conference organised by RenCap in Lagos, he said the deal would reduce the use of the third currency, mainly dollars in the transaction chain. The details of the agreement is expected to be unveiled by the CBN soon.

    Nigeria’s ability to provide support, particularly in foreign currency to commercial banks and importers was weakened by falling oil prices eroding the country’s forex reserves and foreign currency revenues.

    Also, in an emailed note to investors, Afrinvest West Africa Limited, an investment and research firm, said the currency swap deal’s impact will be noticed in periods of forex rate volatility and/or scarcity in the country.

    In the report titled: Gains of the Bilateral Currency Swap Agreement between the CBN and PBoC, Afrinvest said consequent on the opening of the “Swap Line”, both central banks would exchange a stock of their local currencies (RMB 16 billion /N720 billion), which could either be extended by mutual consent at expiration in 2021 or reversed.

    It said the pact, which was as a result of over two years negotiations between both banks, would provide adequate local currency liquidity for Nigerian and Chinese industrialists and other businesses in order to reduce their difficulties in the search for a third currency.

    “We view the agreement as a positive development, given the foreign currency liquidity squeeze Nigeria frequently experiences and the strong trade and investment ties between the two countries. According to the trade statistics by the National Bureau of Statistics (NBS), merchandise trade between China and Nigeria reached a record high of N2 trillion in 2017 (8.7 per cent of total Merchandise trade), thus making China Nigeria’s third largest trading partner after India and the United States (accounting for 12.5 per cent and 10.8 per cent of merchandise trade respectively),” it said.

    It added that the Balance of Trade is heavily tilted in favour of China as imports from China in 2017 (N1.8 trillion) was eight times Nigeria’s export (N220.6 billion) and accounts for 20.9 per cent of total imports in the last five years.

    “This is clearly suggestive of Nigeria’s growing dependence on China, much like most of the rest of the world, for manufactured products and industrial inputs, reinforcing the importance of this currency swap agreement for Nigeria’s import dependent manufacturing and trade sectors which jointly contribute 27.8 per cent to Gross Domestic Product (GDP),” it said.

    The investment firm explained that given the established strategic importance of China as a major trade partner, the bilateral currency swap agreement will be beneficial to the Nigerian economy in several ways.

    “First, it would reduce currency transaction cost for importers and ease forex liquidity pressures in periods of forex rate volatility and/or scarcity. The implementation of this currency swap will also enhance financial stability and external reserves management by reducing the volume of forex interventions in the local market needed to fulfill imports demand,” it said.

    Lastly, it added that the agreement could serve as a risk management and unconventional monetary policy tool as probable losses resulting from transactions affected by volatility in the local currency could be hedged and minimised.

    “As an unconventional monetary policy tool, in managing third currencies pressures and liquidity, the importance of the bilateral currency swap agreement between Nigeria and China cannot be neglected. Whilst we are excited by the symbolism of this agreement, we also note that the impact on the economy will be limited by the relatively small size of the Swap Line, which could barely cover 40 per cent of Nigeria’s Chinese import in a single year,” it said.

     

     

     

    It however, highlighted a key downside risk to the agreement, which is that the ease of transaction with a highly competitive country like China could worsen Nigeria’s trade balance and weaken domestic manufacturing capacity. “We think this concern is justified, particularly in a period of heightened trade skepticism. Yet, it also emphasizes the need to deepen domestic policies on improving competitiveness,” it said.

    On the foreign reserves, a report by FBN Capital, titled: “Towards the $50 billion threshold, and counting”, said the rapid accumulation of $15.96 billion over 12 months was due to two sizeable Eurobond launches, a small diaspora bond issue, the recovery in oil export revenues (through the Nigeria National Petroleum Corporation’s share of production and, more recently, the steady bid by the CBN at the I&E Forex window.

    “We should stress that the data are gross and mask the swap transactions the CBN has entered into with local banks. The steady bid by the CBN has been seen variously as a response to the softening of demand for forex by importers and other economic actors, and as a move to contain naira appreciation,” the FBN Capital said, adding:

    “The CBN will be pleased with the healthy signals from I&E Forex window where the weekly average has now settled above $1 billion. Reserves at end-March covered 17 months’ merchandise imports, and 10.9 months when we add services. These calculations are based on the balance of payments for 2017. The ratios are a little less impressive, but still robust, if we use the measure of current account payments (including income debits) favoured by the ratings agencies.”

    Before the stability in the forex market and naira, the economy witnessed a depressed Gross Domestic Product (GDP) growth, which culminated in a recession in 2016. There was also rising inflation, which peaked at almost 19 per cent in January 2017 and a persistently rising unemployment rate to 14.23 per cent in 2016 fourth quarter from 6.41 per cent as at 2014 fourth quarter. There was also a significant depreciation of the exchange rate, reaching N525 to $1 in February 2017 and witnessed a fast depletion of the reserves which bottomed out at about $23.6 billion in October 2016 from as high as $40 billion in January 2014

     

  • Nigeria’s foreign reserves hit $47.4b

    Nigeria’s foreign exchange reserves rose 2.9 per cent from a month ago to a five year high of $47.36 billion as of April 25, Central Bank of Nigeria (CBN) data showed yesterday.

    Nigeria’s forex buffer stood at $30.76 billion, up 54 per cent from a year ago, but is still far off a peak of $64 billion hit in August 2008

    Meanwhile, oil prices yesterday  jumped after Israel’s Prime Minister Benjamin Netanyahu revealed files he claims show Iran ran a secret program to produce nuclear weapons.

    U.S. crude prices rose from a session low of $67.17 a barrel to above $69.34 a barrel following Netanyahu’s statement. The contract fell back to $68.42 a barrel, still up 32 cents, after the speech.

    Brent crude, the international benchmark, hit a session peak of $75.41 off a low of $73.47. Brent was last up 56 cents at $75.20.

    The oil market has been on edge ahead of a May 12 deadline, when President Donald Trump must decide whether to continue waiving sanctions against Iran under the terms of the nuclear deal or restore the penalties on Organisation of Petroleum Exporting Countries (OPEC’s) third-largest oil producer.

    Prices began moving higher after Netanyahu’s office promised a “significant development” regarding the Iran nuclear deal was coming.

    The International Atomic Energy Agency has repeatedly confirmed that Iran is sticking to the terms of the 2015 accord, which Tehran negotiated with the United States, China, France, Germany, Russia and the U.K.

    Under the agreement, Iran accepted limits on its nuclear program and opened its facilities to international inspectors in exchange for the international community lifting sanctions on its economy.