According to Olayemi Cardoso, Nigeria is not defending the naira with its foreign reserves

Apr 22, 2024 | International | 0 comments

Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), has clarified that the country is not using its foreign reserves to defend the naira. Speaking in Washington DC during the International Monetary Fund-World Bank Spring Meetings, Cardoso mentioned that $600 million recently entered Nigeria’s reserves account within the last two days.

Despite the recent appreciation of the naira against the dollar, gaining over 40% from about N1,900/$ to about N1,000/$1, Nigeria’s foreign reserves have been dwindling. They dropped to about $32.29 billion on April 15, the lowest level in over six years. Cardoso explained that the fluctuation in the reserves is a normal occurrence, stating, “What you’ve seen with respect to the shift in our reserves is normal in any country’s reserves where, for example, debts are due and certain payments need to be made. Other times, money comes in and takes it up again.”

Cardoso emphasized that the shifts in reserves have little or nothing to do with defending the naira, saying, “We are looking towards a market that operates by itself, willing buyers, willing sellers, and price discovery. That is certainly not our objective.”

The Governor highlighted the need for a market that operates through willing buyers and sellers for price discovery. He affirmed that the primary objective is not to defend the naira but to maintain credibility and ensure the smooth operation of the foreign exchange market.

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