See how Nigeria's foreign reserves increased by $4bn

• The Central Bank of Nigeria's foreign reserves have increased since the start of the year to day by $4 billion
• The forex reserves increase offers a potential lifeline to the Nigerian currency in the foreign exchange market
• Shortage of forex supply has always been a major reason the naira has come under intense pressure in both the black and official markets

Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.

Nigeria's foreign reserves have witnessed a significant increase of $4 billion over the past seven months.

Wale Edun, the Minister of Finance and Coordinating Minister of the Economy disclosed while speaking at a meeting organized by the Debt Management Office (DMO) for the issuance of the $500 million local bond set to kick off on Monday, August 19.

CBN gets more firepower to defend naira Photo credit: Bloomberg/contributor
Source: Getty Images

Edun attributed this growth to robust fiscal policies and reforms aimed at enhancing revenue collection efficiency across various sectors.

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He highlighted that the implementation of these measures had doubled the federal government's aggregate revenue, setting the stage for improved economic stability.

Edun said:

“In macroeconomic reforms, the pains come first before the benefits. There have been interventions that gave direct payments to individuals.“The process was difficult at first, but with technology and determination, it has been increased.“Last month, a million households representing five million people received their payments. That will be maintained and increased.”

According to data from the Central Bank of Nigeria (CBN), the external reserves reached $35.05 billion as of July 2024.

Why are foreign reserves important?

Foreign reserves serve as a buffer to support the stability of the Nigerian currency in the international foreign exchange market.

When the CBN intervenes in the foreign exchange market, it uses its foreign reserves to influence the supply and demand of the naira.

The foreign reserves also serve as a means to protect against external shocks and ensure the country's ability to meet its international obligations.

The increase in reserves means that the CBN now has the firepower to intervene in the foreign exchange markets and reduce the pressure of demand for dollars.

CBN hopes for new naira-to-dollar exchange rate

Earlier, Legit.ng reported that the CBN asked Nigerians if they were optimistic that the value of the Nigerian currency would improve in the coming months.

The apex bank said increasing domestic crude oil production and exports would enhance naira's value.

The CBN recently conducted another round of forex sales and reiterated its determination to tackle depreciation of the naira.

Source: Legit.ng