Nigeria’s Foreign Reserves drop to $38bn

Nigeria’s foreign reserves dropped to $38.483bn by May 31, 2022, a five percent decline from $40.521bn reported by the end of December 2021, data on the Central Bank of Nigeria’s website has indicated.

Foreign reserves are assets held on reserve by central banks in foreign currencies, according to Investopedia. These reserves are used to support the economy and boost foreign exchange market during emergencies or periods of crunch.

“If you do not want your foreign reserves to decline, then do more exports,” said Professor of Economics and former Assistant Director of the Central Bank of Nigeria, Jonathan Aremu.

“Then, a big question arises, for an economy with foreign exchange challenges and declining foreign reserves, where do political party candidates get dollars to spend in an economy that uses naira?”

Aremu explained that Nigeria’s foreign reserves would keep dropping when more dollars are spent to pay for imports while foreign exchange earnings from exports keep dropping.

Nigeria is an import-dependent and consuming nation. In 2021, the value of Nigeria’s total trade stood at $39.751tn, but total imports stood at $20.843tn while exports were valued at $18.907.79tn.

However, over 70 percent of the exports were made up of crude, which was shipped abroad, refined and re-imported.

Nigeria earned $45.56bn from crude and non- oil products within the same period, according to the NBS’ Foreign Trade Statistics.  Crude oil made up over 76.22 percent of this amount, while the non-oil earning was 23.78 percent. Non-oil exports were around $10.836bn.

Punch/Hauwa Abu