What's the Fuss About For­eign Ex­change Reserves?

The gov­ern­ment should re­frain from seek­ing to gain po­lit­i­cal cap­i­tal from the ac­cre­tion of Nige­ria's FX reserves. The reserves should con­tinue to be strictly an eco­nomic pol­icy tool.

Financial Nigeria Magazine - - Finance And Society -

Ear­lier in March 2018, the Cen­tral Bank of Nige­ria (CBN) an­nounced that the coun­try's for­eign cur­rency reserves were steadily grow­ing and that the reserves stood at $43 bil­lion. This rep­re­sented al­most 100 per­cent in­crease from about $23 bil­lion recorded in Oc­to­ber 2016 when Nige­ria was in a re­ces­sion. The last time the FX reserves hit the $40 bil­lion mark was in Jan­uary 2014, five months be­fore global oil prices be­gan to fall in mid2014. Sub­se­quent to the apex bank's an­nounce­ment, the reserves reached $45.3 bil­lion as of 21st March, 2018.

To the cur­rent ad­min­is­tra­tion of Pres­i­dent Muham­madu Buhari and the CBN, the ac­cre­tion in FX reserves is hardly about eco­nomics. They con­sider it as a tool for wield­ing po­lit­i­cal clout. How­ever, many Nige­ri­ans have dif­fer­ent opin­ions about the rise in FX reserves. Some peo­ple also won­der why the gov­ern­ment is ac­cu­mu­lat­ing debt at a time its FX reserves are grow­ing. While some of these con­cerns may have va­lid­ity, the gov­ern­ment needs to ed­u­cate the cit­i­zens on the eco­nomic ben­e­fits of for­eign cur­rency reserves. The man in the street wants to know the im­por­tance of for­eign cur­rency sav­ings to his well­be­ing.

Cen­tral Bank of Nige­ria, Abuja

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