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IMF forecasts $8bn fall in Nigeria’s 2024 foreign reservesIMF forecasts $8bn fall in Nigeria’s 2024 foreign reserves

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IMF forecasts 8bn fall in Nigerias 2024 foreign reserves

Nigeria’s foreign reserves for 2024 may decline to $24bn, according to the International Monetary Fund.

The IMF’s latest country report for Nigeria indicates a significant drop in reserves, potentially leading to forex challenges for Africa’s largest economy.

As of February 8, the country’s external reserves stood at $33.12bn.

The IMF anticipated a challenging period through 2024–25 for the country’s financial account. This is exacerbated by factors such as an absence of new Eurobond issuances, significant repayments of existing funds and Eurobonds totalling $3.5 billion, and continued portfolio outflows.

Despite projecting a current account surplus, the reported reserves were expected to diminish to $24bn in 2024. The IMF hopes for a recovery to $38bn by 2028 as portfolio inflows are forecasted to pick up again.

The IMF noted a surplus in the current account in the first half of 2023, but there was a notable decline in reserves. This downturn has been attributed to a decrease in crude oil exports, largely due to oil theft and a lack of investment in essential upstream infrastructure.

Profit repatriation from the oil sector has dipped, albeit slightly offsetting the adverse effects on the current account, according to the IMF report.

Foreign Direct Investment in the country has remained low amidst an uptick in portfolio outflows, including equity and Eurobond repayments as well as repatriations.

According to the report, “The CBN reported a 30-day average of gross international reserves declined to $33bn in October (almost $4bn below end-2022), covering six months of imports and 83 per cent of the IMF’s ARA metric.

Following the IMF’s definition of GIR, $8bn in securities are considered pledged collateral that are thus not readily available, reducing GIR under the IMF’s definition to $25bn at end-October 2023.”

The IMF also claimed that the Nigerian authorities had yet to disclose comprehensive information on short-term foreign exchange liabilities, which are crucial for calculating the net international reserves accurately.

The IMF recently stated that stalled per-capita growth, poverty, and high food insecurity had exacerbated the ongoing cost-of-living crisis in Nigeria. Low revenue collection has hindered the provision of services and public investment, according to the IMF report.

The IMF noted that headline inflation reached 27 per cent year-on-year in October (food inflation 32 per cent), reflecting the effects of fuel subsidy removal, exchange rate depreciation, and poor agricultural production in the country.

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