CBN Reports Historic Low in External Reserves, Rebounds to $40 Billion

The Central Bank of Nigeria (CBN) has revealed alarming figures regarding the country's Net External Reserve, which plummeted to just $859 million in the second quarter of 2023. This unprecedented drop in reserves, described as a negative position for the bank, raised concerns as it amounted to less than a month’s worth of import bills for the nation.

However, in a significant turnaround, the CBN announced that under the leadership of Governor Mr. Olayemi Cardoso, the reserve has now grown back to a commendable $40 billion. This revival was detailed by Dr. Muhammad Abdullahi, the Deputy Governor in charge of Corporate Services, during the opening of the 38th Seminar of the Finance Correspondents and Business Editors held in Abuja.

Dr. Abdullahi noted that when the current administration took office in 2023, they faced numerous challenges, particularly a fragmented foreign exchange market characterized by multiple operating windows and a thriving parallel market. He emphasized that this chaotic environment made it difficult for businesses to navigate the exchange rates and access foreign currency.

“The gap between the official and parallel rates averaged over 60% in 2022 and exceeded 100% at some points later in the year,” he stated. “The World Bank estimated that the implicit subsidy created by this exchange rate setup cost us about 3% of our GDP in 2022,” he added, signifying the severe impacts of the previous exchange rate policies on the economy.

As the CBN continues to implement reforms aimed at stabilizing the economy, the recovery of the external reserves is a positive indicator of progress. The central bank's efforts to streamline the foreign exchange market and reduce the disparity between official and parallel rates are crucial for restoring investor confidence and enhancing economic stability.