Macroeconomic Report & Economic Updates

Nigeria Economic Update (Issue 44)

Nigeria external reserves exceeded US$ 40 billion on 18th November 2021 according to Central Bank of Nigeria (CBN) dataset on external reserves.2 A total of US$ 5.5 billion external reserves were earned between 27th September 2021 and 27th October 2021, as the external reserves increased from US$ 36.3 billion on 27th September 2021 to 41.8 billion on 27th October 2021, which indicates an increase of 15 percent over a month. Since mid-November 2019, external reserves have been consistently lower than US$ 40 billion. The upward trend in reserves can be attributed to several factors including Special Drawing Right allocation of US$ 3.35 from the IMF, and the CBN stoppage of selling dollar to Bureau de Change. The upward movement in external reserves would help in reducing pressure on naira. Thus, the naira is expected to maintain a stable rate as the reserves increase. Ongoing reforms in the exchange rate management system aimed at unifying the exchange rate should be sustained and improved upon. A unified exchange rate erodes arbitrage associated with multiple exchange rates. Furthermore, the less diversified structure of the country’s export bases which makes the country to depend on few commodities for external reserves is unhealthy for the economy. Existing support schemes for the manufacturing sector both in terms of technical skills and financial resources should be strengthened to increase their output level for the domestic and the export markets.

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