Nigeria’s foreign exchange (FX) reserves have dipped by about $505.68 million (1.37%) in August 2024, according to the latest reading on the reserves from the Central Bank of Nigeria (CBN).
However, the marginal decline is coming on the heels of the federal government’s issuance of a $500 million domestic dollar bond, expected to bolster the nation’s foreign reserves.
Specifically ,the bond is the latest in a series of external borrowings that the government has embarked on to shore up its foreign reserves, finance key infrastructural projects, and meet budgetary needs.
The Minister of Finance and Coordinating Minister of the Economy, Wale Edun has said recently that the $500 million domestic dollar bond will enhance external reserves and help stabilize the foreign exchange situation in the country.
But, CBN reported a reduction of $505.68 million, bringing the reserves down from $36.827 billion on August 1 to $36.321 billion by August 29, 2024.
The data shows an indication of a consistent decline throughout August, with a notable dip in the final week.
The reserves, which stood at $36.827 billion at the beginning of the month, gradually decreased as the weeks progressed.
By August 8th, the reserves had decreased to $36.848 billion, and by mid-month, they had further dropped to $36.529 billion on August 15th.
The decline continued steadily, reaching $36.444 billion by August 22nd and then $36.321 billion by the month’s end.
First time in four months
The dip represents the steepest monthly decline in Nigeria’s forex reserves since April 2024.
This persistent decline comes after a four-month period of about $4 billion growth in the external reserves. It also means that the reserves have lost about 12.64% of its four-month gain in August 2024.
It further highlights the struggle faced by Nigeria’s financial authorities in maintaining reserve levels amidst ongoing economic pressures, including the need to meet import demands and debt obligations, as well as manage liquidity for the naira’s stability.
Amid the decline in FX reserves, the Nigerian official foreign exchange (FX) market experienced a marked decline in turnover in August, despite the initial Retail Dutch Auction conducted by the CBN.
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There was a reduction of $1.08 billion, with total turnover falling to $3.25 billion, from $4.34 billion recorded in July 2024.
This decline of 25% highlights the ongoing challenges faced by the official FX market in terms of liquidity and stability.
The average daily FX turnover decreased from $189.42 million in July to $144.71 million in August, reflecting a 23.61% reduction. This decline suggests a significant drop in market activity, indicating increasing difficulties in accessing foreign currency.
On August 19, 2024, the federal government of Nigeria officially issued a $500 million domestic dollar bond.
This bond, part of the government’s financing initiatives, has a 9.75% per annum interest rate and is set to mature in 2029.
