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Depleted foreign reserves used to settle debts, not defend Naira – Cardoso - VANGUARD

APRIL 18, 2024

The Central Bank governor, Olayemi Cardoso, has said the recent decline in the nation’s foreign reserves was used to settle debts owed to international creditors and not to defend the naira.

The governor made this known during an interactive session with Abebe Aemro Selassie, the International Monetary Fund’s (IMF) director of the African department, on Wednesday.

Concerns have been raised by Nigerians recently regarding the significant decrease in the country’s exchange reserves, dropping by around $2.16 billion in just 29 days, despite robust efforts to stabilize the naira.

Data retrieved from the CBN website regarding the movement of foreign reserves reveals that as of April 15, 2024, the FX reserves stand at $32.29 billion, marking a notable decline from the $34.45 billion recorded on March 18, 2024.

This decline, the lowest in six years, signifies a definitive halt to a period of consistent growth. During this time, the reserves experienced a 43-day surge, accruing $1.28 billion between February 5 and March 18, 2024.

However, speaking at the event, Cardoso stated that there were no intentions to defend the currency with the external reserves, as it was counterintuitive.

The CBN boss clarified that the depleting external reserve is due to the payment of debts.

“As much as I have read in the recent few days, some opinions with respect to what is happening with our reserves, and the central bank defending the naira, if you think back to what our overall policy and philosophy has been, you can see is counterintuitive,” he said.

“What you see with respect to the shifts in our reserves, is the shifts that you will find in any country’s reserve situation where, for example, debts are due and when certain payments need to be made, they’re made because that is also part of keeping your credibility intact.

“Other times, money comes in and you know, takes it up again, and if you watch the next couple of days, I think between yesterday and today, we had about 600 million that came to the reserves account.

“All I will say is that we are looking towards ensuring that we have a market that operates on its own: willing buyer, willing seller and price discovery. That’s where we’re going to be.”


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