Nigeria’s external reserves have experienced a significant reduction, dropping by $343 million within nine days to reach $36.53 billion as of August 15, 2024, according to data from the Central Bank of Nigeria (CBN). This decline follows the sale of $876.26 million through the Retail Dutch Auction System to meet demands from importers and other users.
This reduction in reserves is occurring just before the Nigerian government’s planned issuance of a $500 million domestic dollar
bond, which is expected to bolster the country’s external reserves and stabilize the foreign exchange situation. The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, emphasized that this bond issuance is a strategic move to enhance foreign exchange liquidity, stabilize the naira, manage inflation, and attract both domestic and foreign investments.
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The bond, set to be issued on Monday, is notable as the first of its kind in Nigeria. It offers a bullet repayment at maturity in U.S. dollars with a full repayment of the principal at the end of the five-year term. Investors can participate with a minimum subscription of $10,000, with additional investments in increments of $1,000.
The recent decline in reserves, which culminated in a 0.93% decrease over nine days, highlights the ongoing challenges faced by Nigeria’s financial authorities. These include balancing the need to meet import demands, servicing debt obligations, and managing liquidity to maintain the naira’s stability. This situation is further complicated by discrepancies in reported reserve figures, as recent checks revealed that the actual reserves on July 18, 2024, were $35.93 billion, contrary to the $37.05 billion announced by the CBN governor during a Monetary Policy meeting.
