In a concerning forecast by the International Monetary Fund (IMF), Nigeria’s foreign reserve is expected to see a significant reduction, falling to $24 billion by next year, 2024.
This forecast was contained in the IMF’s latest country report for Nigeria, signalling potential challenges ahead for Africa’s largest economy.
Nigeria is currently facing significant challenges with foreign exchange illiquidity, impacting the country’s ability to clear its forex backlog and further depreciating the country’s currency’s value.
As of February 8, 2024, data from the Central Bank of Nigeria (CBN) put the country’s foreign reserves at $33.12 billion, indicating a substantial drop is on the horizon, according to the international financial institution’s projections.
The IMF noted that the first half of 2023 witnessed a surplus in the current account, yet there was a notable decline in reserves.
This downturn has been attributed to a decrease in hydrocarbon exports, largely due to rampant theft and a lack of investment in essential upstream infrastructure.
Additionally, profit repatriation from the oil sector has seen a downturn, albeit slightly offsetting the adverse effects on the current account.
Nigeria’s financial account likely to deteriorate 2024-25.
The IMF anticipates a challenging period through 2024–25 for Nigeria’s financial account, exacerbated by 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 officially reported reserves are expected to diminish to $24 billion in 2024, with a hopeful recovery to $38 billion by 2028 as portfolio inflows are forecast to pick up once again.