$8bn May Fall In Nigeria’s 2024 Foreign Reserves, Says IMF
The International Monetary Fund has projected that the Nigeria’s foreign reserves may fall to $24bn in 2024.
This was disclosed by the fund in its latest country report for Nigeria, indicating a significant drop and potential forex challenges for Africa’s largest economy.
The country’s external reserves stood at $33.12bn as of February 8.
The IMF forecasted a difficult period through 2024–25 for the country’s financial account, exacerbated by an absence of new Eurobond issuances, significant repayments of existing funds and Eurobonds totalling $3.5 billion, and continued portfolio outflows.
According to the report, “Through 2024–25, the financial account is likely to deteriorate, with no projected issuance of Eurobonds, large Fund and Eurobond repayments of $3.5bn, and portfolio outflows.
“Hence, despite a current account surplus, officially reported reserves are projected to decline to $24bn in 2024 before increasing again to $38 billion in 2028 as portfolio inflows resume.”
The IMF said the first half of 2023 witnessed a surplus in the current account, yet there was a notable decline in reserves.
The downturn was due to a decrease in crude oil exports, largely attributed to oil theft and a lack of investment in essential upstream infrastructure.
During those dynamics, Foreign Direct Investment in the country remained low, while there has been an uptick in portfolio outflows, including equity and Eurobond repayments as well as repatriations.
"The CBN reported a 30-day average of gross international reserves declined to $33bn in October (almost $4bn below end-2022), covering six months of imports and 83 per cent of the IMF’s ARA metric.
“Following the IMF’s definition of GIR, $8bn in securities are considered pledged collateral that are thus not readily available, reducing GIR under the IMF’s definition to $25bn at end-October 2023.
“The authorities have not shared full information on short-term FX liabilities which would be necessary to calculate net international reserves. Through 2024–25, the financial account is likely to deteriorate, with no projected issuance of Eurobonds, large Fund and Eurobond repayments of $3.5 billion, and portfolio outflows," the report added.
Also, the IMF declared that the Nigerian authorities had yet to disclose comprehensive information on short-term foreign exchange liabilities, which are crucial for calculating the net international reserves accurately.
Recently, the fund noted that stalled per-capita growth, poverty and high food insecurity had exacerbated the ongoing cost-of-living crisis in Nigeria.
The IMF further explained that the low revenue collection has hampered the provision of services and public investment.