President Muhammadu Buhari of Nigeria is on course to leave the office with an external reserve of roughly $36 billion, up from the amount he met in 2015.
When he took office, the president had a $29.4 billion external reserve. Due to falling international oil prices and a forex policy of protecting the naira with reserves, the country was experiencing a foreign exchange crisis at the time, with reserves having been depleted by a staggering $4.8 billion year to date.
By the end of that year, the external reserve had decreased by $525 million since Buhari assumed office. The nation experienced a recession in 2016 as a result of the worsening crude oil crisis.
Additionally, for two years, the government maintained the N197/$1 exchange rate, which caused reserves to drop as low as $23.9 billion in late 2016.
The central bank also instituted an interest rate incentive program that gave high-interest rates in exchange for bringing in foreign currency, attracting high-interest rates in return for doing so.
The external reserves reached their greatest level since 2013 of $47 billion in 2019 because of this policy.
Additionally, the COVID-19 epidemic made matters worse because foreign investment ceased. External reserves had decreased by around $3 billion during the first quarter of 2020, reaching $35 billion.
Since 2020, as a result of oil theft and a decline in foreign investment, the IMF, the World Bank, and Eurobond loans have all contributed to maintaining external reserves.
The estimated $36 billion inheritance for the next president seems likely.
Except in exceptional circumstances, as it did so before the end of 2022, the central bank under Godwin Emefiele has been conservative with disbursing currency to preserve the naira.
A rise in crude oil production will improve foreign exchange inflows, providing the central bank room to keep reserve levels.
However, the next president must pay back a $500 million Eurobond by the middle and end of the year, respectively.
The CBN is also concentrating on non-oil export routes and remittances to strengthen the economies of the west African countries, and this might be advantageous if it produces encouraging results.
The external reserve is a gauge of how robust an economy is, in terms of its impact on currency stability, import support during crises, and currency security.
In order for the country’s currency to compete with other major world currencies like the US dollar, the euro, and the pound sterling, various government officials and the head of the central bank often take steps to increase the country’s foreign reserves.