The Central Bank of Nigeria says Nigeria’s net usable external reserves stood at $859m in the second quarter of 2023 before rising to $40bn three years later.
The CBN Deputy Governor, Corporate Services, Dr Muhammad Abdullahi, disclosed this in Abuja on Tuesday at the opening of the 38th Seminar of Finance Correspondents and Business Editors.
Abdullahi said the apex bank inherited a foreign exchange market that was fragmented, with multiple trading windows operating alongside a large parallel market.
He said the situation made it difficult for businesses to determine applicable exchange rates and access foreign exchange.
According to him, the gap between the official and parallel market rates averaged more than 60 per cent in 2022 and exceeded 100 per cent at some points.
He said the World Bank had estimated that the implicit subsidy created by the exchange rate arrangement cost Nigeria about three per cent of its Gross Domestic Product in 2022.
Abdullahi said the pressure also affected the country’s external reserves, noting that the gross reserve figure did not fully reflect the country’s usable position after short-term obligations were taken into account.
He added that outstanding foreign exchange forward claims had exceeded $7bn, while declining capital inflows and uncertainty over access to foreign exchange made it difficult for businesses to price goods, plan investments and meet their obligations.
The deputy governor said the challenges prompted the CBN to introduce a series of reforms over the past three years.
He said the bank consolidated the existing foreign exchange windows in June 2023 and moved towards a willing-buyer, willing-seller framework.
The CBN also removed restrictions that had kept 43 categories of imports from accessing the official foreign exchange market and reviewed outstanding forward claims.
Abdullahi said valid claims were subsequently settled, reducing uncertainty for businesses and investors.
Meanwhile, the CBN Director of Banking Supervision, Dr Olubukola Akinwunmi, said the apex bank had strengthened its supervision of financial institutions to safeguard the stability of the banking system.
Akinwunmi said the CBN had also enforced a regulation limiting Nigerian banks’ investments in offshore subsidiaries to 10 per cent of their shareholders’ funds.
He said the regulation existed before the current CBN administration but had not been implemented diligently.
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