- The Central Bank of Nigeria (CBN) has issued a cautionary statement regarding potential risks to the growth of Nigeria’s external reserves in its Monetary, Credit, Foreign Trade, and Exchange Policy guidelines for the fiscal years 2024/2025. The apex bank highlighted that the removal of fuel subsidies, increased import bills, and rising external debt servicing obligations could pose significant challenges to the growth of external reserves.
Despite these concerns, the CBN maintains an optimistic outlook for Nigeria’s economic growth. The positive projection is supported by anticipated favorable terms of trade, sustained crude oil prices, and improved domestic oil production. Additionally, continued policy support in agriculture and oil sectors, as well as reforms in the foreign exchange market, are expected to bolster economic output.
However, the CBN also pointed out several risks that could hinder economic progress. These include:
Reduced revenue from crude oil sales due to fluctuating global prices.
Potential negative impacts on external reserves from the removal of fuel subsidies.
Higher costs associated with importing goods.
Growing obligations for servicing external debt.
The CBN noted that sustained monetary policy tightening by central banks in advanced economies could further increase the risk of capital outflows. Additionally, domestic prices are expected to remain high due to global supply constraints and exchange rate pass-through effects.
Challenges such as persistent security issues, infrastructure deficits, and the global economic slowdown, exacerbated by the Russia-Ukraine war, could also affect the growth outlook. The CBN emphasized that the performance of the fiscal sector will depend heavily on the effective implementation of the Finance Act 2023 and the restructuring of key revenue-generating agencies.
The financial sector is anticipated to remain resilient, with ongoing efforts by the CBN to monitor and mitigate emerging vulnerabilities and risks through stress tests and risk management strategies.
