The International Monetary Fund (IMF) has made a concerning prediction regarding Nigeria’s foreign reserves, estimating a significant reduction to $24 billion in the year 2024.
This forecast, detailed in the IMF’s latest country report for Nigeria, highlights potential challenges ahead for Africa’s largest economy.
As of February 8, 2024, data from the Central Bank of Nigeria (CBN) showed the country’s foreign reserves at $33.12 billion, indicating a substantial drop according to the IMF’s projections.
The IMF attributed this downturn to various factors, including a decrease in hydrocarbon exports due to theft and insufficient investment in upstream infrastructure.
Additionally, profit repatriation from the oil sector and low Foreign Direct Investment (FDI) have contributed to the decline.
Looking ahead, the IMF anticipates a challenging period for Nigeria’s financial account in 2024-25, marked by an absence of new Eurobond issuances, significant repayments, and continued portfolio outflows.
Despite projecting a current account surplus, officially reported reserves are expected to decline to $24 billion in 2024 before gradually recovering to $38 billion by 2028.
The IMF emphasized the importance of effectively managing Nigeria’s external financial obligations and navigating the external financial landscape to secure and expand foreign reserves.
However, the IMF noted that comprehensive information on short-term foreign exchange liabilities is yet to be disclosed by Nigerian authorities, which is crucial for accurately calculating net international reserves.
Ultimately, Nigeria faces the challenge of balancing its economic stability while managing external financial pressures, underscoring the importance of prudent financial management and strategic decision-making in safeguarding the country’s economic well-being.