INFLOWS into Nigeria’s external reserves were higher in January despite the Central Bank of Nigeria’s (CBN) receipt of over $1 billion capital inflow in February.

The apex bank reportedly disclosed that foreign portfolio inflows exceeded $1 billion in February, driven by interest rate hikes.

At the end of its two-day monetary policy committee (MPC) meeting on February 27, the CBN raised the benchmark interest rate by 400 basis points to 22.75 per cent, The ICIR reported.

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According to the CBN spokesperson, Hakama Sidi-Ali, foreign investor demand for Nigerian assets and money sent home by citizens living abroad surged in February as portfolio investor asset purchases exceeded $1 billion, bringing the total receipts so far this year to at least $2.3 billion, compared with $3.9 billion for the whole of 2023, Bloomberg reported on Friday, March 8.

Sidi-Ali said overseas remittances rose more than fourfold to $1.3 billion in February from a month earlier, “driven by increased investor interest in short-term sovereign debt following the recent adjustment to benchmark interest rates.”

However, checks by The ICIR show that Nigeria’s external reserves improved more in January than in February, as the external reserves rose by $441.24 million in January compared to 364.94 million in February.

Data from the CBN shows that at the beginning of the year, Nigeria’s total gross external reserves stood at $32.91 billion and rose to $33.35 billion as of January 30, representing a $441.24 million increase.

In February, the gross external reserves at $33.35 billion at the beginning of the month rose to $33.72 billion at the end of the month, February 29, and represented a $364.94 million increase.

Nigeria’s crude oil production declined in January; however, the increase in external reserves was still higher in January compared to February, according to data from the Organisation of Petroleum Exporting Countries (OPEC).

It showed that the country’s crude oil production dropped to 1.149 million barrels per day (bpd) in January from 1.422 million bpd in December 2023; the increase in external reserves was higher in January than in February.

The external reserves, which include assets denominated in a foreign currency and held by the CBN central bank, are derived mainly from the proceeds of crude oil production and sales and complemented by diaspora remittances, including foreign direct investment (FDI), foreign portfolio investments (FPI), and other capital inflow.

The gross external reserves, which stood at $35.094 billion as of May 30, 2023, had declined by $1.374 billion to $33.72 billion as of February 29.

Since assuming office on May 29, 2023, President Bola Tinubu has initiated reforms impacting the country’s economy.

Notably, the reform on the unification of foreign exchange has weakened the Naira significantly against the dollar, from about N461 at the beginning of his administration to N1,627.40 per dollar as of yesterday, March 8.

Analysts believe the reform has eroded investors’ confidence as the government takes measures to attract investors back into the economy and support the Naira, which has lost more than 225 per cent of its value since May last year.

The measures include relaxing foreign exchange controls, easing rules on international money transfers and reducing the gap between the central bank’s policy rate and yields on the short-dated paper it sells at auctions.

“All the different measures we have taken to boost reserves and create more liquidity in the markets have started to pay off,” the CBN governor, Olayemi Cardoso, stated.

Meanwhile, since the apex bank’s February MPC meeting, the Naira has lost 2.81 per cent to N1,627.40 per dollar in official trading on Friday, March 8.

The ICIR reports that managing the external reserves is one of the core mandates of the CBN as stipulated in Section 2 (c) of the CBN Act of 2007.

The Act vested the maintenance and management of Nigeria’s external reserves on the CBN to safeguard the Naira’s international value, maintain confidence in its monetary and exchange rate policies, and provide confidence to the international community that the country can meet its external obligations.