Nigeria losing $520m of its external reserves in five weeks offers a picture too grim
Stopping fuel subsidy has led to a strain that household income cannot keep up with but the Central Bank of Nigeria thinks the benefits would eventually come although not so soon.
![Dr Yemi Cardoso, the Central Bank of Nigeria governor telling the guests at a dinner about shortfalls in the external reserves. [CIB Nigeria]](https://i0.wp.com/meiza.ng/wp-content/uploads/2023/12/Dr-Yemi-Cardoso-the-Central-Bank-of-Nigeria-governor-telling-the-guests-at-a-dinner-about-shortfalls-in-the-external-reserves.-CIB-Nigeria-e1702296391798.jpg?fit=1600%2C800&ssl=1)
By Precious Iyanuoluwa
The Central Bank of Nigeria, at a recent Lagos-held Chartered Institute of Bankers dinner has confirmed fears about the country’s external reserves depleting, with up to $520.22 lost in the space of five weeks.
At the Chartered Institute of Bankers of Nigeria’s 58th Annual Bankers’ Dinner and 60th anniversary Grand Finale on Friday, November 24 where he was the special guest of honour, the apex bank Governor, Dr Olayemi Cardoso, linked dwindling crude oil production as a reason for the consistent drop.
The CBN’s data has shown that the external reserves by 31 October 2023 amounted to $33.396bn and then there was a decline that led it to descend to $33.004bn as of December 7, 2023.
According to Cardoso, the frequent drops in the reserves have “led to a decline in government revenue and foreign exchange inflows, while simultaneously witnessing a growth in public expenditures and a deterioration in macroeconomic indicators, which has constrained our policy options.
“Consequently”, adds the governor “we have seen the fiscal deficit and public debt increase, placing additional strain on external reserves and contributing to exchange rate instability.”
He further mentioned in his reports that the above challenges had led to increased interest rates, discouraging investments in productive activities.
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Within the Nigerian banking system, high inflation has affected asset quality and solvency ratios. There is a particular risk for domestic banks with foreign exchange exposures because of the persistent depreciation of the naira posing a threat.
Although it won’t happen so soon, there is light on the horizon and this was observed in the governor’s dinner address. Dr Cardoso predicted that “the removal of petrol subsidy and the adoption of a floating exchange rate, among other government policies, are anticipated to have positive effects on the economy in the medium term.”
The results to follow this may include reviving investors’ confidence which then inspires desperately needed capital inflows that trickle down to enabling local content and boosting non-oil exports as planned.
But it all still comes down to taming inflation first if all these are to materialise. And so, that is what policymakers have found themselves grappling with.
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Ayodelé is a Lagos-based journalist and the Content and Editorial Coordinator at Meiza. All around the megacity, I am steering diverse lifestyle magazine audiences with ingenious hacks and insights that spur fast, informed decisions in their busy lives.
