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By Chinwendu Obienyi
Investment banking and asset management arm of First Bank of Nigeria, FBNQuest, on Monday revealed that remittance recovery through International Money Transfer Operators (IMTOs) significantly contributed to a $40.9 billion reserve growth in 2024.
Data obtained from the Central Bank of Nigeria (CBN) showed that the nation’s gross official reserves increased by $652.4 million month-on-month (m/m) to $40.9 billion as at the end of December 2024. This also signifies a $8.0 billion on a year-on-year (y/y) basis.
The nation’s reserves position has largely been on an upward trend since January 2024 and this notable improvement according to FBNQuest can be attributed to the return of foreign investors, due to the elevating yield environment resulting from the apex bank’s tight monetary policy stance.
The monetary authority raised interest rates by 875 basis points (bps) in 2024, underscoring the committee’s aggressive stance in combating rising inflationary pressures. In contrast, major central banks in advanced economies shifted their policy stance from monetary tightening to monetary policy easing in 2024 due to moderation in inflation readings.
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Notably, the US Federal Reserve implemented a cumulative rate cut of c.100 bps in 2024, the same magnitude of interest rate reductions made by the European Central Bank.
“Returning to the data, the sustained rise in external reserves was bolstered by the recovery of diaspora remittances through the International Money Transfer Operators (IMTO) channel, driven by CBN’s initiatives to encourage diaspora inflows and improve FX market liquidity.
The positive external reserve balance was also supported by FX borrowings, including proceeds from the domestic dollar-denominated debt, the recent Eurobond issue of about USD2.2bn and various loans from international lenders.
Furthermore, the country’s external reserve position also benefited from higher oil earnings, resulting from improved crude oil production and exchange rate gains”, the report stated.
For context, revenue performance data from the Budget Office of the Federation indicates that oil revenue amounted to N4.1 trillion over eight months in 2024, an increase from the oil receipts of N2.4trn received in 2023.
Similarly, gross reserves at the end of Dec 2024 covered 12.3 months of merchandise imports and 8.5 months when services were included, higher than the coverage of 11.7 months and 8.1 months recorded in the previous month.
“Looking ahead, we expect a sustained rise in Nigeria’s external reserves on the back of foreign capital inflows arising from carry trade opportunities, and higher diaspora remittances. The CBN’s initiatives aimed at improving fairness and transparency in the FX market will also be supportive” FBNQuest said.
