Nigeria’s external reserves decline not linked to Naira defence, says CBN’s Cardoso

By Samuel Bankole

Governor of the Central Bank of Nigeria (CBN), Yemi Cardoso has sought to clarify recent apprehensions regarding the decrease in the country’s external reserves.

Contrary to speculations, Cardoso said that the decline is not attributable to efforts aimed at defending the naira.

Instead, Cardoso attributed the reduction in foreign exchange (FX) reserves to routine debt repayments and other standard financial commitments, underscoring that the apex bank’s objective does not revolve around currency defence.

He reiterated the CBN’s adherence to a willing buyer, willing seller policy, highlighting the minimal interventionist stance adopted by the bank.

Impact of Debt Repayments on Reserves Cardoso elucidated that Nigeria’s dwindling external reserves are primarily influenced by the country’s obligation to fulfill its debt obligations, a customary practice essential for upholding national credibility in the global financial landscape.

He emphasized that such shifts in reserves are commonplace in countries facing similar debt repayment obligations.

Nigeria’s escalating external debt service requirements, including payments on Eurobonds and other international financial commitments, have led to substantial outflows of foreign currency, further depleting the reserves.

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Notably, the nation’s expenditure on external debt servicing surged to $560 million in January 2024, marking a significant increase compared to the previous year.

Willing Buyer, Willing Seller Policy Reaffirming the CBN’s commitment to a market-driven approach, Cardoso underscored the bank’s advocacy for currency prices to be determined by willing buyers and sellers, without direct intervention from the bank.

This policy aligns with the overarching philosophy of minimal interference upheld by the CBN.

Interventions to BDCs Minimal Cardoso addressed initial interventions in the bureau de change (BDC) segment, characterizing them as minimal and aimed at ensuring effective integration into the broader market.

Looking ahead, he envisaged a scenario where the central bank would seldom need to intervene in the currency market, except in extraordinary circumstances.

Fresh $600 Million Influx Cardoso disclosed that the reserve account witnessed an inflow of approximately $600 million over the past two days, stressing that these movements are routine and not geared towards defending the naira.

He emphasized the importance of maintaining sufficient liquidity in the market to foster a vibrant currency market and minimize the need for intervention.