The Central Bank of Nigeria has provided a detailed clarification regarding the decline observed in the nation’s international trade reserves. Contrary to common belief, the primary objective behind this decline is not solely focused on defending the naira; instead, it partially involves the repayment of debts owed to collectors.
Moreover, the bank has expressed its inclination towards minimizing its involvement in the market, with the aim of fostering an environment where prices are determined through the interactions of willing buyers and sellers. This strategic shift underscores the significance of allowing market forces to determine prices rather than relying heavily on intervention by the central bank.
During the ongoing International Monetary Fund/World Bank Spring Meetings in Washington, D.C., CBN Governor Olayemi Cardoso elaborated on the reasons behind the decline. He emphasized that the recent slight decrease in reserves was unrelated to the defense of the naira. Additionally, he assured that the nation can expect to witness an uptick in reserves soon, as an additional $600 million is expected to be received.
Governor Cardoso outlined that the decline in reserves was primarily attributed to debt repayment obligations. He reiterated the central bank’s commitment to facilitating a market-driven exchange rate system, emphasizing the importance of allowing market dynamics to determine prices. Furthermore, he highlighted a notable increase in forex liquidity during his tenure, with daily transactions averaging $1 billion, significantly higher than the $200-300 million witnessed in previous administrations.
Addressing concerns about rising inflation, Governor Cardoso affirmed the government’s efforts to address the issue. He also mentioned that the utilization of strategies and means has been discontinued as a collaborative effort between the central bank and the Ministry of Finance.
