LAGOS – Nigeria’s foreign reserves have experienced a significant boost, with the Central Bank of Nigeria (CBN) recording an average net inflow of $2.35 billion each month, according to Wale Edun, the Minister of Finance and Coordinating Minister of the Economy. Edun made this announcement during the 2024 Access Bank annual corporate forum held in Lagos, where he detailed the government’s efforts to stabilize the nation’s currency and improve fiscal conditions.
Edun highlighted that this uptick in foreign reserves has contributed to maintaining stability in the naira within the foreign exchange market. “We have relative currency stability. And of course, the all-important margin of the rates. We’ve seen a gradual elimination of multiple exchange rates,” Edun said.
The Minister noted that this increase has been consistent for the first seven months of 2024. “The gross reserves are up. There has been a net inflow in the first seven months of this year of about $2.35 billion every month.”
Impact on Fiscal Revenues and Government Spending
Apart from the foreign exchange reserves, Edun also shared insights into the government’s fiscal performance. He emphasized that government revenues are on the rise, although the country still faces challenges related to its low tax-to-GDP and revenue-to-GDP ratios. Currently, Nigeria’s tax-to-GDP ratio stands at 10%, and revenue to GDP hovers around 15%.
On the fiscal front, Edun remarked, “The key to government revenue is not so much that the government has revenue to compete with the private sector. It’s the fundamentals, the social and the key infrastructure spending. The social safety net spending.”
This improvement in revenue, according to the Minister, will allow the government to spend more on critical areas such as infrastructure development and social welfare, which have historically been underfunded.
Export Diversification and Crude Oil Production
Edun also touched on the government’s focus on diversifying Nigeria’s export base, particularly in the services sector. According to him, Nigeria has the necessary demographics and skills to expand into service exports. This, he believes, will complement the country’s ongoing efforts to increase crude oil production to 2 million barrels per day (bpd) by the end of 2024.
“There is a commitment to ramp up oil production to 2 million bpd before the end of the year,” he said, while also reiterating that export diversification remains a key focus. “Our exports need to be significantly diversified, and an important area we need to look at is the services. We have the demographics as well as the relatively skilled population which means we can export our services,” he added.
The Bigger Picture: Rising Foreign Reserves and Inflows
The recent rise in Nigeria’s foreign reserves is largely attributed to higher interest rates and the devaluation of the naira, making the country a more attractive destination for foreign investments. According to the CBN, foreign reserves reached $34.66 billion in June 2024, marking a historic high.
Additionally, remittances inflows also saw a surge, increasing by 130% to $553 million in July 2024, further boosting foreign exchange liquidity. These developments, along with increased foreign portfolio investments, have provided a more stable environment for the naira, offering hope for continued economic stability.
This significant growth in reserves and inflows signals a positive trend for Nigeria’s economic outlook as the government pushes forward with reforms aimed at stabilizing the economy and diversifying its revenue streams beyond oil.
