The Central Bank of Nigeria (CBN) has expressed concerns over the country’s foreign exchange reserves, citing potential risks stemming from the removal of the petrol subsidy and lower crude oil earnings.
As of September 12, 2024, Nigeria’s external reserves stood at $36.08 billion, according to CBN data.
In its newly published ‘Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines for the Fiscal Years 2024-2025,’ the CBN highlighted the challenges posed by increased external debt servicing obligations, which could negatively impact the growth of external reserves during the period.
The CBN said;
“Lower crude oil earnings, fuel subsidy removal, rising import bills and increased external debt servicing obligations could pose downside risks for the accretion to external reserve.
In addition, the sustained monetary policy tightening by central banks across advanced economies increases the risk of capital outflow.”
Despite these challenges, the CBN remains optimistic about Nigeria’s external sector outlook for 2024 and 2025. The regulator expects favourable terms of trade, driven by a sustained rally in crude oil prices and improvements in domestic crude oil production.
Additionally, the CBN noted that this positive outlook is bolstered by the continued rise in crude oil prices due to production cuts, as well as capital inflows and remittances contributing to the country’s foreign reserves.