Nigeria’s foreign reserves increased from $38.4 billion in September 2024 to $40.2 billion in October 2024.
The Central Bank governor, Olayemi Cardoso, announced this Wednesday at an investors’ meeting in Washington, DC, in the United States.
Nigeria’s minister of finance and coordinating minister of the economy, Wale Edun, was also present at the meeting. He stated that the government’s choice to forgo defending the naira, as it has done in the past, is causing the country’s gross reserves to grow naturally.
Edun highlighted the government’s dedication to upholding openness in how Nigeria’s foreign reserves are managed.
Edun informed investors that the government is dedicated to providing frequent updates on the nation’s reserve situation, which alleviated a major concern about net reserves.
When asked about net reserves, Edun responded, “I believe we stated that we are very committed to sharing that number very shortly. We had given a timeline earlier in the year, and had said that hopefully by the end of this year, we’ll be able to share aggregated reserves, and we are committed to that.”
Edun clarified that the organic increase in gross reserves results from the Central Bank of Nigeria’s (CBN) choice to let the market determine the naira’s exchange rate rather than protecting it.
“The gross reserves are being generated naturally, primarily because we are no longer defending the naira, as previously. A billion dollars a month only to defend the naira,” he said, emphasizing the tremendous expense of previous policies to stabilize the currency.
Edun stated that the government is also attempting to increase investor confidence and create buffers to stabilize the economy by allowing the market to play a bigger role.
“We’re allowing the market as much as possible to set the level for the naira, and we are building the buffers to improve that confidence and ensure that we have enough input cover.”
He asserts that the government wants to naturally increase the foreign exchange supply without significant central bank intervention. Although the CBN may occasionally interfere in the market, he admitted that the ultimate goal is to have a stable exchange rate independent of central bank actions.
“We’re making every effort to enhance our supply naturally so that the central bank doesn’t constantly have to contribute funds. Therefore, our goal is to reach a point where there is stability without the need for central bank intervention or market reliance on the central bank.”
Edun also emphasized how foreign portfolio investment (FPI) has benefited the economy.
“We have had some significant amount of improvements in terms of flows from the relative side, foreign portfolio investment (FPI) have put in a significant amount,” he explained.
He said investor trust has increased in the nation, and many are now eager to invest more money in the Nigerian market.
“We’ve had a positive reaction from investors through the FPI. We’ve also noticed increased confidence among those who wish to invest a lot more resources.”
Nigeria has responded favorably to Open Market Operations (OMO) auctions held following the meetings of the Monetary Policy Committee, he said, adding, “We’re trying as much as possible to ensure that the market is not dependent on the interventions of the central bank and in terms of the levels of supply.”
