Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy, announced on Wednesday that the country’s gross reserves are increasing organically due to the government’s strategy of not defending the naira, unlike previous practices.
Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), confirmed that Nigeria’s external reserves have now reached $40.2 billion.
During a meeting with foreign investors in Washington D.C., Edun reaffirmed the government’s dedication to transparency in managing Nigeria’s foreign reserves. He addressed investor concerns about net reserves, stating that the government is committed to providing regular updates. “We’re dedicated to sharing that number very soon. We previously indicated a timeline, and we aim to share aggregated reserves by the end of this year,” Edun noted.
He explained that allowing the market to determine the naira’s exchange rate, rather than having the CBN defend it, has contributed to the organic growth of gross reserves. “The reserves are building organically because we’re not defending the naira as we did before, which previously cost us a billion dollars each month,” he highlighted.
Also Read:
- Foreign Investors Sell N355bn Stocks Amid Forex Crisis
- Britain’s Foreign Secretary arrives India for trade talks
Edun emphasized that this market-driven approach is intended to boost investor confidence and create economic stability. “We’re letting the market play a larger role, which will help us build buffers to stabilize the economy,” he said.
The government’s objective is to increase the supply of foreign exchange organically, with minimal intervention from the CBN. While he acknowledged that the CBN may still intervene occasionally, the aim is to achieve a stable exchange rate independent of central bank support. “We want to improve our supply without constantly relying on the central bank’s funds,” Edun added.
He also pointed out the positive effects of foreign portfolio investment (FPI) on the economy, noting significant improvements in investment flows, particularly in the oil sector. “We’ve seen a strong response from investors through FPI and an increase in their confidence to invest more in Nigeria,” he stated.
Edun mentioned the favorable response to Open Market Operations (OMO) conducted following Monetary Policy Committee meetings, further supporting the notion of a self-sustaining market.
He highlighted the benefits of removing fuel subsidies and adopting market-based pricing for petroleum products. “For the first time in 40 years, we now have a free market for petrol, diesel, and jet fuel. Local refiners can purchase crude in naira, refine it, and sell in local currency. This reform has required significant courage but has eliminated a subsidy that previously consumed about 5 percent of GDP,” he explained.
Regarding government revenues, he expects the Nigerian National Petroleum Corporation (NNPC) to start addressing its obligations, including those tied to foreign exchange subsidies. Edun assured that the situation with arrears is being managed carefully, with the NNPC purchasing dollars from the market to meet its obligations, although this places some pressure on the foreign exchange market. He concluded that ongoing discussions aim to resolve these issues transparently and promptly, with NNPC beginning to pay down its debts, and this trend is expected to continue.
