Nigeria’s Net Foreign Reserves Surpass $40 Billion

The Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, yesterday disclosed that Nigeria’s net foreign reserves have risen to $40 billion presently, compared with about $3 billion it was when he assumed office in 2023.

Equally, he revealed that the country’s gross external reserves have also climbed to about $52 billion, providing approximately 10 months of import cover.

Cardoso, disclosed this in Lagos, same day the CBN issued comprehensive operational guidelines for the implementation of its electronic foreign exchange (FX) purchase platform for Bureau De Change (BDC) operators, introducing a real-time transaction monitoring system, stricter Know-Your-Customer (KYC) requirements and enhanced compliance measures aimed at strengthening transparency, regulatory oversight and efficiency in the retail segment of the Nigerian Foreign Exchange Market (NFEM).

Speaking at the BusinessDay CEO Forum, the CBN Governor also disclosed that diaspora remittances are on course to reach $1 billion monthly by the end of the year, while noting that the FX market has become sufficiently liquid to operate with minimal intervention from the CBN.

He also said the bank recapitalisation and regulatory oversight would remain a continuous exercise to strengthen the resilience of the banking sector.

The CBN governor said the country’s stronger external position underscores the success of the reforms implemented over the past three years, particularly the unification of the FX market and the restoration of investor confidence.

According to him, the apex bank inherited an FX market characterised by multiple exchange rates, opacity and acute shortages, but has since transformed it into a more transparent and market-driven system.

He said: “Anybody that wants to argue about what the impact of these reforms have been, go and look at the results. As of yesterday, we were hovering, I believe, about $52 billion. “When we started, the net reserves figure was in the region of about $3 billion plus. And if you remember, that was a figure that was published at the time by J.P. Morgan and created a lot of panic in the system. More recently, the net reserves figure is in the $40bn range. So, it’s a long and difficult journey.”

Cardoso added that the current reserve position has significantly strengthened Nigeria’s external buffers and improved the country’s attractiveness to foreign investors.

According to him, “Today’s level of reserves is, I believe, about 10 months of import cover. Anybody coming to invest in Nigeria, these are the things they look at in determining whether it is worth taking a position in your currency.

“Doing this consistently is what is giving confidence to not just internal stakeholders, but those who also operate internationally.”

He further noted that another visible outcome of the reforms was the restoration of confidence in Nigeria’s payment system, saying Nigerians can now use their bank cards seamlessly abroad.

“When you travel today, you go with your naira card. It works. It has brought back the way the outside world looks at us. In the past, you go there, the card doesn’t work. Can’t pay for your goods. They look at your naira card. They throw it back at you. Not any longer.”

On the steady build-up of external reserves, Cardoso said the CBN deliberately diversified sources of FX inflows, with diaspora remittances emerging as one of its key priorities.

He added: “When we were building these reserves, there was a lot of cynicism. One of the things we decided to go after was the diaspora remittances. We put together teams. We worked very closely with the banks. We went far and wide. We visited different countries.

“At the time, we gave ourselves a goal that we would double the remittance inflows between the time we started and the end of the year, and we did exactly that. That is still work in progress.

“We are not relenting on that. As at the last time, I believe we were $600 million plus. We are expecting that by the end of the year we will hit about $1 billion a month from diaspora remittances.”

He explained that the improvement was driven by policy reforms that removed bottlenecks to inflows by ensuring easier entry and exit of funds.

Cardoso also dismissed suggestions that the growing reserve stockpile should be deployed aggressively to defend the naira, stressing that reserves are primarily meant to serve as buffers against external shocks rather than for routine market intervention.

The CBN Governor said: “Today, the liquidity of our foreign exchange market is such that it is really and truly allowing us to operate a system where buying and selling takes care of itself with minimum interference from the Central Bank.”

He added that the market had moved beyond an era when participants depended almost entirely on the CBN for liquidity, noting that the stronger reserve position gives the apex bank sufficient capacity to intervene only when necessary to cushion the economy against external volatility.

On banking sector reforms, Cardoso said the recapitalisation exercise, which attracted about N4.65 trillion in fresh capital, has significantly strengthened the resilience of the banking industry, stressing that supervisory oversight would continue beyond the capital raise.

“Our oversight on banks does not stop at the fact that they have raised capital. No. It is going to be continuous because we need a strong, resilient banking sector to be able to take us to where we want to go,” he added.

He added that as inflation moderates and interest rates gradually decline, banks would be better positioned to channel more credit to the productive sectors of the economy, particularly small and medium-scale enterprises, while continuing to build the capacity required to manage associated risks.