IMF: Nigeria’s reserves may fall to $24bn in 2024

The International Monetary Fund (IMF) has forecasted that Nigeria's foreign reserves could plummet by $8 billion to $24 billion in 2024, with a potential rebound to about $38 billion by 2028. This projection comes amidst expectations of portfolio flows picking up once again. Kingsley Nwaiwu, the Head of Consumer Sector Sales for Global Market at Stanbic IBTC, recently discussed these forecasts and more in a TV interview on CNBC Africa. Nwaiwu highlighted the impact of monetary policy mechanisms on driving foreign exchange (FX) liquidity in Nigeria. He emphasized the need for further tightening and rate hikes to attract foreign portfolio investors (FBIs) and boost FX liquidity. Recent reforms by the Central Bank of Nigeria (CBN) have aimed at increasing liquidity by encouraging FBIs to invest in interest rate instruments. One key reform discussed was the directive for banks to sell off long positions, leading to increased liquidity in the market. Additionally, changes in guidelines for International Money Transfer Organizations (IMTOs) have influenced the NAFEX rates, promoting price discovery and market efficiency. Nwaiwu also noted the impact of the Nigerian National Petroleum Corporation (NNPC) transferring dollar revenues to the CBN, enhancing transparency and accountability in revenue management. The conversation also touched on the backlog of forward sales in 2022 and 2023, with a forensic audit revealing discrepancies in delivered funds. Nwaiwu expressed optimism about clearing the backlog by Q1 2024. He also addressed the IMF's projection of Nigeria's FX reserves potentially dropping to $24 billion this year, citing factors such as upcoming maturities and expected improvements in production. Regarding the absence of new Eurobond issuance exacerbating the reserve forecast, Nwaiwu highlighted the government's potential plans for dollar borrowings and Eurobond issuance later in the year. He emphasized the balance needed in foreign borrowings to manage debt servicing effectively. In conclusion, Nwaiwu remained optimistic about Nigeria's FX reserves, noting ongoing market reforms and the government's efforts to instill investor confidence. Despite challenges, he expressed confidence in a market recovery and increased FX reserves in the future.