The Central Bank of Nigeria (CBN) has raised concerns about potential challenges to the growth of Nigeria’s external reserves for the fiscal years 2024/2025. According to the CBN’s Monetary, Credit, Foreign Trade, and Exchange Policy Guidelines, factors such as the removal of fuel subsidies, rising import costs, and increased external debt servicing could negatively impact the nation’s external reserves.
Despite these challenges, the CBN maintains an optimistic outlook for Nigeria’s economy, citing expected benefits from higher crude oil prices, improved domestic oil production, and favorable trade terms. The bank also anticipates gains from capital inflows and remittances.
However, the CBN highlights several risks that could affect the external reserves:
- Lower Crude Oil Earnings: Reduced earnings from crude oil due to lower production or prices could impact reserve growth.
- Fuel Subsidy Removal: The elimination of fuel subsidies might lead to increased energy costs and inflationary pressures, affecting overall economic stability.
- Rising Import Bills: Higher costs for imports could put additional strain on the external reserves.
- Increased External Debt Servicing: Growing obligations related to external debt could limit the resources available for reserves.
The CBN also notes that the tightening of monetary policies by advanced economies may increase the risk of capital outflows from Nigeria. While the bank anticipates a positive growth trajectory for Nigeria’s economy, challenges such as rising energy costs due to the ongoing Russia-Ukraine conflict, as well as persistent security and infrastructure issues, could undermine this outlook.
On the fiscal front, the CBN expects a positive recovery trajectory, supported by the implementation of the Finance Act 2023 and the 2022-2025 Medium-Term National Development Plan (MTNDP). However, risks such as low domestic crude oil production, rising public debt, and global economic uncertainties remain significant concerns.
The financial sector is expected to remain resilient, with ongoing efforts by the CBN to monitor and mitigate emerging vulnerabilities and risks.
News Editor