The International Monetary Fund said Nigeria's foreign reserves could fall to $24 billion by 2024.
The fund revealed this in its latest national report for Nigeria, indicating a significant decline and potential currency challenges for Africa's largest economy.
The country's external reserves stood at US$33.12 billion on February 8.
The IMF has predicted a challenging period through 2024-25 for the country's financial account, exacerbated by the absence of new eurobond issuances, significant repayments of existing funds and eurobonds totaling $3.5 billion, and continued outflows. of wallet.
Despite a projected current account surplus, reported reserves were expected to decline to US$24 billion in 2024, with a hopeful recovery to US$38 billion in 2028, as portfolio inflows were expected to increased again.
The report said: “Over 2024–25, the financial account is expected to deteriorate, with no eurobond issuance, large fund repayments and $3.5 billion eurobonds expected, and portfolio outflows.
“Thus, despite a current account surplus, officially declared reserves are expected to decline to $24 billion in 2024, before increasing again to $38 billion in 2028, as portfolio inflows resume.” .”
The IMF noted that the first half of 2023 witnessed a current account surplus but there was a notable decline in reserves.
The recession was attributed to a decrease in crude oil exports, largely due to oil theft and a lack of investment in essential upstream infrastructure.
The IMF report adds that the repatriation of profits from the oil sector has decreased, although this slightly offsets the adverse effects on the current account.
Amid this dynamic, Foreign Direct Investment in the country remained low, at the same time as there was an increase in portfolio outflows, including refunds of shares and Eurobonds, as well as repatriations.
The report adds: “The CBN reported that a 30-day average of gross international reserves declined to US$33 billion in October (almost US$4 billion below the end of 2022), covering six months of imports and 83 percent from the IMF's ARA metric.
“Following the IMF definition of RIB, $8 billion in bonds is considered pledged collateral and is therefore not readily available, reducing RIB under the IMF definition to $25 billion at the end of October 2023.
“Officials did not share complete information about the short-term foreign exchange liabilities that would be needed to calculate net international reserves. By 2024–25, the financial account is expected to deteriorate, with no Eurobond issuance expected, large Fund and Eurobond repayments of $3.5 billion and portfolio outflows.”
The IMF also stated that Nigerian authorities had not yet released complete information on short-term foreign exchange liabilities, which are crucial for accurately calculating net international reserves.
The fund recently stated that stagnant per capita growth, poverty and high food insecurity have exacerbated the current cost of living crisis in Nigeria.
According to the IMF, low revenue collection has hampered the provision of services and public investment.
He noted that global inflation reached 27 percent year on year in October (32 percent food inflation), reflecting the effects of the removal of fuel subsidies, exchange rate depreciation and weak agricultural production in the country.