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External reserves seen rising further on inflows

External reserves seen rising further on inflows

Experts say external reserves will increase rapidly as Nigeria begins to see some foreign inflows.

Nigeria‘s foreign reserves have risen by 2.19 percent month-on-month, following streams of dollar inflows from international financial institutions.

Data from the Central Bank of Nigeria (CBN) revealed that external reserves grew to $33.159 billion as of June 11, 2024 from $32.447 billion in May 10, 2024.

The Federal Government (FG) has secured $3 billion Afreximbank facility to boost industrialisation

The landmark agreement was formalised through a Memorandum of Understanding (MoU) signed during the concluded Afreximbank Annual Meetings (AAM) 2024.

Read also: Naira trades flat, external reserves rise as $925m Afreximbank loan boost liquidity

Doris Udoka-Anite, Nigeria’s Minister of Industry, Trade and Investment, represented the country in the signing ceremony. This initiative was set to establish a Nigeria Industrialisation Financing Facility, which will support the development of special economic zones, industrial parks, and light manufacturing sectors across Nigeria.

The World Bank, last week, approved a total of $2.25 billion loan for Nigeria to help stabilise the economy following reforms and scale-up support for the poor.

Yemi Kale, group chief economist and managing director of research and international cooperation at Afreximbank, said that borrowing is only meant to fix some temporary problems.

“But you have to create a system where you have a sustainable inflow of foreign exchange after that,” he said.

Uche Uwaleke, special adviser to the Chairman of the Senate Committee on Banking, Insurance, and other Financial Institutions, said the recent accretion to external reserves is primarily due to increase in foreign portfolio investments, crude oil production, and foreign loans.

“Except improvement in crude oil production is sustained, the level of external reserves will likely plummet as the portfolio investments mature and the Federal Government’s obligations to foreign creditors kick in after the period of moratorium,” Uwaleke further said.

The dollar supply by willing buyers and willing sellers increased by 13.47 percent to $183.47 million on Friday, June 15, 2024 from $161.69 million as of June 10, 2024, according to data from the FMDQ Securities Exchange Limited.

At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira closed flat on Friday, gaining marginally by 0.06 percent as the dollar was quoted at N1,482.72 on June 15 as against N1,483.62 closed on June 10, 2024.

African Export-Import Bank (Afreximbank) on Thursday announced an additional disbursement of $925 million under the syndicated $3.3 billion crude oil-backed prepayment facility sponsored by the Nigerian National Petroleum Company (NNPC) Limited. This brings the total current funded facility size to $3.175 billion.

For the industrialisation facility, the comprehensive plan includes the creation of special economic, industrial, and agro-processing zones, which are expected to generate 20,000 new jobs. The facility will particularly focus on enhancing the automotive sector and the Compressed Natural Gas (CNG) value chain, essential for advancing the country’s automotive and transport industries.

Read also: Naira falls, external reserves dip despite FX reforms 

The financing package also extends to the diaspora investment fund framework, providing technical and financial backing.

Additionally, it signifies a robust partnership between Nigeria’s Ministry of Industry, Trade and Investment, Arise Integrated Industrial Platforms (Arise IIP), and Afreximbank, aimed at revitalising Nigeria’s cotton, apparel, and textile value chain.

Arise IIP, a venture owned by the Africa Finance Corporation (AFC) and Equitane, specializes in designing, financing, building, and operating integrated industrial zones. This collaboration is expected to create significant employment opportunities and attract over $2 billion in investments, reinforcing Nigeria’s commitment to economic diversification.

Afreximbank emphasized the historical significance of this initiative: “This is going to cut across the cotton belt in Nigeria and also create a lot of jobs in Nigeria’s core strength in terms of cotton and textile production which used to be the pride of the country in the 1980s and 1990s. So, we are bringing it back and working together to get that done,” it said.