CBN: Nigeria Inherited $859m Net External Reserves in 2023

The Central Bank of Nigeria (CBN) has disclosed that Nigeria’s net usable external reserves stood at just $859 million in the second quarter of 2023, describing the position as unprecedented in the bank’s history.

The apex bank said the figure has since risen to about $40 billion under the current administration of CBN Governor Olayemi Cardoso.

The CBN Deputy Governor in charge of Corporate Services, Dr. Muhammad Abdullahi, disclosed this in Abuja during the opening of the 38th Seminar of Finance Correspondents and Business Editors.

According to him, the CBN inherited a foreign exchange market in 2023 that was highly fragmented, with multiple exchange-rate windows and a large parallel market.

He said the gap between the official and parallel exchange rates averaged more than 60 percent in 2022 and exceeded 100 percent at certain periods.

Abdullahi said the World Bank had estimated that the implicit subsidy created by the exchange-rate system cost Nigeria about 3 percent of GDP in 2022.

He added that Nigeria’s external reserves were under pressure, while outstanding foreign-exchange forward claims had exceeded $7 billion, increasing uncertainty for businesses and investors.

The deputy governor said the challenges prompted a series of reforms, including the consolidation of foreign-exchange windows in June 2023 and the adoption of a willing-buyer, willing-seller framework.

He said the CBN also removed restrictions that had prevented 43 categories of imports from accessing the official foreign exchange market and reviewed outstanding forward claims.

Meanwhile, the CBN Director of Banking Supervision, Dr. Olubukola Akinwunmi, said the apex bank had strengthened its supervision of commercial banks to safeguard the stability of the financial system.

Akinwunmi disclosed that Nigerian banks are now restricted from investing more than 10 percent of their shareholders’ funds in offshore subsidiaries.

He explained that the regulation had existed previously but was not implemented rigorously before the current CBN administration.