The Central Bank of Nigeria (CBN) has announced a remarkable recovery of the nation’s Net External Reserve, which had plummeted to $859 million in the second quarter of 2023. This figure, described as unprecedented in the bank's history, represents less than a month's worth of import bills. Under the leadership of Governor Mr. Olayemi Cardoso, the reserves have since rebounded to $40 billion.

Dr. Muhammad Abdullahi, the Deputy Governor in charge of Corporate Services, shared these details at the opening of the 38th Seminar of the Finance Correspondents and Business Editors held in Abuja. He highlighted the myriad challenges faced by the CBN upon assuming office in 2023, including a fragmented foreign exchange market characterized by multiple operating windows and a significant parallel market.

In 2022, the gap between the official and parallel exchange rates averaged over 60%, with some instances exceeding 100%. This disparity created an implicit subsidy that the World Bank estimated cost Nigeria about 3% of its GDP that year. The pressure on external reserves was evident, with the CBN reporting that after accounting for short-term obligations, the net usable reserves stood at a mere $859 million.

The CBN's struggles were compounded by declining capital inflows and uncertainty regarding foreign exchange access, which hindered businesses from pricing goods, planning investments, and fulfilling obligations. Dr. Abdullahi noted that these challenges necessitated a series of reforms aimed at stabilizing the foreign exchange market and restoring investor confidence.

One of the first significant steps taken was in June 2023, when the CBN consolidated the existing exchange rate windows and transitioned to a willing-buyer, willing-seller framework. This shift was accompanied by the removal of restrictions on 43 categories of imports from the official market, which had previously hampered trade.

In addition to these reforms, Dr. Olubukola Akinwunmi, the Director of Banking Supervision at the CBN, emphasized the bank's increased oversight of the financial sector. He stated that the CBN has tightened its supervisory role to prevent the banking system from deteriorating, which could jeopardize economic stability. A new regulation now prohibits any Nigerian bank from investing more than 10% of its Shareholders’ Fund in offshore subsidiaries, a measure that aims to enhance the resilience of the banking sector.

The CBN's proactive measures reflect a commitment to addressing the challenges in Nigeria's financial landscape and restoring confidence among investors and businesses alike.