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.
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