Categories: NewsWorld

Why Nigeria’s Nigeria’s External Reserves May Shrink To $29.1B – IMF

The International Monetary Fund has said Nigeria’s external reserves could fall to $29.1bn by 2024 on the back of lower oil prices, restricted Eurobond market access, and higher capital outflows.

The IMF disclosed this in its ‘Nigeria Staff Report for the 2021 Article IV Consultation’ report.

Advertisement

According to the report, the country’s external position is weaker as external buffers are limited.

The Washington-based lender said, “High interest payments relative to fiscal revenues expose Nigeria to interest rate and growth shocks.

Advertisement

“A downside scenario assuming lower oil prices, restricted Eurobond market access, and higher capital outflows could drop reserves to $29.1bn in 2024 with repayments to the Fund rising to 3.7 per cent of exports, 6.3 per cent of reserves, and 7.9 per cent of external debt service.”

According to the report, the gaps in information on FX swaps pose a risk to this assessment, although the authorities assess these swaps to be negligible.

Advertisement

It said, “Nigeria’s external position is assessed to be weaker than warranted by fundamentals. External buffers are limited, with FX reserves projected to remain below 100 percent of the IMF’s ARA metric in the medium term.

“Given still significant naira asset holdings of FPIs, estimated at $16.9bn as of September 2021, Nigeria remains vulnerable to capital outflow pressures notwithstanding the authorities’ steady clearing of FX payments backlogs to FPIs.

Advertisement

“Further drains on FX reserves could come from existing FX swap arrangements for which details were not available.”

The IMF said to boost its external position, Nigeria must establish a unified and market-clearing exchange rate, together with policy clarity.

Advertisement

It added that to preserve competitiveness, any exchange rate adjustment should be accompanied by clear communications regarding exchange rate policy.

It stressed the need for macroeconomic policies to contain inflation and structural policies to facilitate new investments in the country.

Advertisement

According to figures obtained from the Central Bank of Nigeria, the nation’s external reserves stood at $39.69bn as at February 9, 2022.

The Central Bank of Nigeria said on Friday that it would stop the sale of foreign exchange to Deposit Money Banks by the end of the year as a means to boost the nation’s foreign reserves through proceeds from non-oil exports.

Advertisement

The CBN Governor, Godwin Emefiele, said banks must begin to source their forex from export proceeds, hence the need to support non-oil exporters in the country.

He had said, “The banks don’t have a choice and I said so this morning in the meeting, I said the era where because a bank needs $100m foreign exchange or $200m, they will bring the request to the CBN to fulfil, is coming to an end.

Advertisement

“Before or latest by the end of this year, (DMBs) will not come to the CBN for foreign exchange again. They should go and generate their export proceeds, fund people who want to generate non-oil export proceeds, when the proceeds come we will fund them at five per cent for you, the proceeds will earn rebates, that is how we can help you.”

Advertisement
Sola Adeyemo

Recent Posts

BBNaija’s Dorathy goes naughty on her birthday(Photos)

Dorathy Bachor has put her massive cleavage on display as she turns a year older.…

57 mins ago

I didn’t lose 2023 election, you stole it – Atiku to Tinubu

Former vice president, Atiku Abubakar has insisted that the outcome of the 2023 presidential election…

1 hour ago

Breaking: Tinubu Directs Release Of Minors Arraigned For Hunger Protests

President Bola Tinubu on Monday, directed the immediate release of all the minors who were…

1 hour ago

Eniola Ajao reveals why she nearly poisoned herself

Eniola Ajao, a popular Yoruba actress and filmmaker has revealed how fake news on social…

3 hours ago

Agatha Amata releases new photos on her 55th birthday

Agatha Amata is celebrating her 55th birthday today Taking to X to celebrate her new age,…

3 hours ago

Legendary music producer, Quincy Jones d!es at 91

Legendary American music producer, Quincy Jones has died at the age of 91.    …

4 hours ago