Nigeria’s external reserves have surged by 12.99 percent year-to-date, reaching a 22-month high of $37.31 billion as of September 18, 2024, according to data from the Central Bank of Nigeria (CBN). Despite this significant increase, the naira continues to struggle, recently ranked as one of the 10 worst-performing currencies globally by Bloomberg.
Thank you for reading this post, don't forget to subscribe!The reserves, a key indicator of the nation’s capacity to meet international obligations and stabilize the naira, have seen growth driven by domestic dollar bonds, remittances, and foreign investments. However, these inflows have failed to prevent the naira from depreciating by 49.56 percent in the official foreign exchange market over the past year.
Key drivers of the reserve growth include the federal government’s $2 billion domestic dollar bond issuance, which attracted foreign investors, and an uptick in remittances. Between July 2023 and July 2024, Nigeria recorded $553 million in remittance inflows, alongside multilateral loans from AfreximBank and the World Bank.
Despite these gains, the naira has plummeted in both official and parallel markets, with rates reaching N1,539.65 per dollar in the official market and N1,660 in the black market as of mid-September 2024.
The ongoing confidence crisis in the foreign exchange market, fueled by speculative activity, continues to hinder the local currency’s recovery despite rising external reserves.
