By Okafor Joseph Afam
October 16, 2024

The Governor of Nigeria’s Central Bank, Olayemi Cardoso, revealed that the nation’s foreign reserves increased by 12.74%, reaching $39.12 billion as of October 11, 2024, up from $34.70 billion at the end of June. However, he expressed concern over rising inflation but maintained an optimistic outlook for the future.

Appearing before the House of Representatives Committee on Banking Regulation on Tuesday, Cardoso emphasized the substantial growth of the nation’s foreign exchange reserves, attributing it to various factors, including remittance flows, which now represent 9.4% of total external reserves.

“The reserves rose by 12.74% to $39.12 billion as of October 11, 2024, from $34.70 billion at the end of June 2024,” Cardoso stated. He attributed this growth to foreign capital inflows, crude oil-related tax receipts, and other third-party sources.

Cardoso highlighted the improvement in Nigeria’s trade balance during the second quarter of 2024, stating, “We maintained a current account surplus and saw remarkable improvements in our trade balance.” He noted that the current level of foreign reserves is sufficient to finance over 12 months of imports of goods and services or 15 months of goods alone—far exceeding international standards.

On the foreign exchange market, Cardoso discussed reforms implemented by the Central Bank, including unifying the exchange rate windows into a single framework. The goal of these reforms was to enhance transparency and reduce market distortions.

“We adopted a willing buyer, willing seller approach, which streamlined various exchange rate windows. This move aimed to foster transparency and enhance FX liquidity,” he said, noting that the policy measures helped stabilize the foreign exchange market by narrowing the disparity between the official and parallel market rates.

Additionally, the resumption of FX sales to the Nigerian Autonomous Foreign Exchange Market (NAFEM) and Bureau De Change (BDC) segments, supported by increased inflows from foreign portfolio investors, played a crucial role in restoring confidence in the foreign exchange market. This, in turn, led to increased capital inflows, with capital importation rising by 65.56% to $6.49 billion between January and July 2024.

While celebrating these successes, Cardoso admitted that inflation remains a significant challenge, despite recent efforts to control it. “Inflation is still a pressing concern,” he said, although he also indicated that monetary policy measures are beginning to show signs of effectiveness.

Cardoso explained that the Central Bank has adopted a more orthodox monetary policy approach, raising the policy rate to 27.25% and increasing cash reserve ratios as part of efforts to manage liquidity and stabilize prices. Additionally, the bank has implemented an inflation-targeting framework, aimed at further curbing inflationary pressures.

Looking ahead, Cardoso expressed confidence in a steady moderation of inflation in the last quarter of 2024, supported by both the Central Bank’s monetary policy measures and government initiatives, including tax incentives for businesses.

“These collective actions are expected to stabilize the financial system, improve investor confidence, and help manage inflationary pressures going forward,” Cardoso concluded.