IMF Forecasts Nigeria’s External Reserves to Drop to $24 Billion In 2024
The International Monetary Fund (IMF), says Nigeria’s External Reserves will drop to a record low of $24 billion in 2024.
Central Bank of Nigeria (CBN), data showed Nigeria’s Foreign Reserves stood at $33.12 billion as of February 8, 2024.
The IMF in its latest country report for Nigeria noted that the first half of 2023 witnessed a surplus in the current account, yet there was a notable decline in reserves.
Through 2024–25, the report says the financial account will likely deteriorate, with no projected issuance of Eurobonds, large fund and Eurobond repayments of $3.5 billion, and portfolio outflows.
Hence, despite a current account surplus, officially reported reserves are projected to decline to $24bn in 2024 before increasing again to $38 billion in 2028 as portfolio inflows resume.
The IMF noted that the first half of 2023 witnessed a surplus in the current account, yet there was a notable decline in reserves.
The downturn has been attributed to a decrease in crude oil exports, largely due to oil theft and a lack of investment in essential upstream infrastructure.
The IMF report added that profit repatriation from the oil sector had dipped, albeit slightly offsetting the adverse effects on the current account.
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Amid those dynamics, Foreign Direct Investment in the country has remained low, while there has been an uptick in portfolio outflows, including equity and Eurobond repayments as well as repatriations.
The report added that the CBN reported a 30-day average of gross international reserves declined to $33bn in October (almost $4bn below end-2022), covering six months of imports and 83 percent of the IMF’s ARA metric.
Following the IMF’s definition of GIR, $8bn in securities are considered pledged collateral that are thus not readily available, reducing GIR under the IMF’s definition to $25bn at end-October 2023.
The authorities have not shared full information on short-term FX liabilities which would be necessary to calculate net international reserves.
Through 2024–25, the financial account is likely to deteriorate, with no projected issuance of Eurobonds, large Fund and Eurobond repayments of $3.5 billion, and portfolio outflows.
The IMF also claimed that the Nigerian authorities had yet to disclose comprehensive information on short-term foreign exchange liabilities, which are crucial for calculating the net international reserves accurately.
The fund recently said stalled per-capita growth, poverty, and high food insecurity had exacerbated the ongoing cost-of-living crisis in Nigeria.
According to the IMF, low revenue collection has hampered the provision of services and public investment.
It noted that headline inflation reached 27 percent year-on-year in October (food inflation 32 percent), reflecting the effects of fuel subsidy removal, exchange rate depreciation, and poor agricultural production in the country.
