Depleted foreign reserves used to settle foreign debts, not defend Naira – Cardoso


Central Bank Governor Clarifies Use of Foreign Reserves for Debt Settlement

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Olayemi Cardoso, the Central Bank governor, addressed concerns about Nigeria’s declining foreign reserves, emphasizing that recent reductions were primarily attributed to settling debts owed to international creditors rather than defending the value of the naira.

During an interactive session with Abebe Aemro Selassie, the International Monetary Fund’s (IMF) director of the African department, Cardoso explained that the decrease in foreign reserves was part of regular debt repayment obligations.

Data from the CBN website shows that Nigeria’s foreign reserves dropped from $34.45 billion on March 18, 2024, to $32.29 billion on April 15, 2024, representing a decline of around $2.16 billion within 29 days.

Cardoso clarified the purpose behind this reduction, stating, “There were no intentions to defend the currency with the external reserves, as it was counterintuitive.”

He emphasized that fluctuations in foreign reserves are typical for any country, with funds allocated for debt payments as necessary to maintain credibility.

“In recent days, there have been opinions suggesting that the central bank is using reserves to defend the naira. However, our policy philosophy is focused on maintaining a market-driven exchange rate system,” Cardoso explained.

He highlighted that while debt payments contribute to reserve declines, inflows also occur periodically, noting a recent deposit of approximately $600 million into the reserves account.

Cardoso reaffirmed the central bank’s commitment to fostering a market environment based on willing buyers and sellers, emphasizing transparent price discovery mechanisms as the ultimate goal for Nigeria’s currency exchange operations.

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Emman Tochi
Emman Tochi
Emma Tochi is Naija247news Media Northern Bureau Chief, he's based in FCT Abuja. He overseas the northern operations of this business media

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