The Central Bank of Nigeria (CBN) has said Nigeria’s net usable external reserves have risen from $859 million in the second quarter of 2023 to about $40 billion following reforms introduced under Governor Olayemi Cardoso.
The CBN’s Deputy Governor, Corporate Services, Dr Muhammad Sani Abdullahi, disclosed this on Tuesday at the 38th Seminar for Finance Correspondents and Business Editors in Abuja.
Abdullahi said the apex bank inherited significant challenges when the current administration assumed office in 2023, including a fragmented foreign exchange market, large outstanding foreign exchange obligations, weak capital inflows and pressure on external reserves.
He said the net usable reserves position of $859 million in the second quarter of 2023 was recorded after accounting for identified short-term obligations and was insufficient to cover one month’s imports.
According to him, outstanding foreign exchange forward claims had also exceeded $7 billion at the time, adding to uncertainty for businesses and investors.
Abdullahi said Nigeria’s foreign exchange market was previously characterised by multiple trading windows operating alongside a large parallel market.
He said the gap between official and parallel-market exchange rates averaged more than 60 per cent in 2022 and exceeded 100 per cent at certain periods.
The deputy governor also cited a World Bank estimate that the implicit subsidy associated with the previous exchange-rate arrangement cost Nigeria about three per cent of its gross domestic product in 2022.
He said the challenges contributed to difficulties for businesses in pricing goods, planning investments and meeting foreign exchange obligations.
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“The gap between the official and parallel rates averaged over 60% in 2022 and exceeded 100% at some points later in the year,” Abdullahi said.
He explained that the CBN responded by introducing a series of reforms aimed at improving price discovery, strengthening liquidity management and restoring confidence in the foreign exchange market.
The first major step, according to him, came in June 2023, when the CBN consolidated the existing foreign exchange windows and moved towards a willing-buyer, willing-seller framework.
The bank also removed restrictions that had prevented 43 categories of imports from accessing the official foreign exchange market and reviewed outstanding forward claims.
Abdullahi said valid claims were subsequently settled, helping to address a major source of uncertainty for businesses and investors. Recent reports say the CBN has also pointed to a narrowing gap between official and parallel-market rates following the reforms.
The deputy governor said the reforms were part of a broader effort to restore macroeconomic stability and strengthen Nigeria’s financial system.
CBN tightens oversight of banks
Also speaking at the seminar, the Director of Banking Supervision at the CBN, Dr Olubukola Akinwunmi, said the apex bank had strengthened its supervisory oversight of financial institutions.
Akinwunmi said tighter supervision was necessary to prevent excessive risk-taking and protect the stability of the banking system.
He also said the CBN was enforcing a regulation limiting Nigerian banks’ investments in offshore subsidiaries to 10 per cent of their shareholders’ funds.
According to him, the rule existed before the current CBN administration but was not implemented diligently.
The regulation is intended to limit the risks associated with excessive exposure to overseas operations and prevent problems in foreign subsidiaries from affecting the stability of Nigerian banks.
The CBN has continued to emphasise stronger supervision alongside the banking sector’s recapitalisation programme, with the apex bank urging financial institutions to deploy stronger balance sheets towards productive lending and economic activity.
