Foreign exchange swaps fuelling decline in Nigeria’s FX reserves – MPC member 

A member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN), Bamidele A.G. Amoo, has said that the decline in Nigeria’s foreign exchange (FX) reserves was mainly due to foreign exchange swap transactions. 

He said this in his personal statement from the MPC meeting, which was held between March 25 and 26, 2024. A document containing the personal statements of MPC members was published by the CBN on Monday and seen by Nairametrics.  

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Amoo said: 

• “Nigeria’s Foreign reserves stood at US$32.87 billion as of March 19, 2024, from US$33.68billion in the previous month. The decrease was majorly due to foreign exchange swap transactions. 
• “In the foreign exchange market, the average NFEM rate as of March 20, 2024, stood at N1410.90/USD, N 1,536.83/US$, N1,520/US$, at the Refinitiv, FMDQ and BDC market segments giving an appreciation of 8.65, 3.65 and 1.94 per cent respectively.” 

He also noted that Nigeria recorded a surplus in its overall balance of payments as foreign portfolio investors drove higher capital inflows. 

The MPC member said: 

• “The overall balance of payments recorded a surplus position relative to the preceding quarter, due mainly to accretion to external reserves from third party receipts. 
• “Apart from the higher inflow of diaspora remittances, the economy recorded a higher capital inflow of US$1.24 billion by end-February 2024 relative to US$0.33 billion in January 2024. 
• “The capital inflow came from foreign portfolio investments, specifically through money market instruments and other investments from the loans sub-sector.” 

More Insights 

• Nairametrics earlier reported that Nigeria’s foreign exchange (FX) reserves maintained a one-month dip streak, reaching a new low of $32.12 billion on April 17, 2024. The reserves dropped by $2.33 billion in 31 days, from $34.45 billion on March 18, 2024, marking the lowest level since September 20, 2017, when they were $32.08 billion.  
• The CBN governor, Yemi Cardoso, recently said that the decreasing reserves were primarily due to debt repayments and other standard financial obligations, rather than efforts to defend the naira. 
• Cardoso also disclosed that the reserve account has seen an influx of approximately $600 million recently, stressing that the movements in the country’s FX reserves were routine and not aimed at defending the naira. 
• Nairametrics further observed that the FX reserves are on a slow rise, increasing by $24 million in a marginal recovery from over one month dip.