Why Nigeria’s foreign reserves is rising — Edun

The minister of finance and coordinating minister of the economy, Wale Edun, announced on Wednesday that the country’s gross foreign reserves have grown due to the government’s decision to stop defending the naira through heavy interventions.

Edu made this known on Wednesday during a Nigeria fixed income meeting with foreign investors in Washington, D.C.

The governor of the CBN, Olayemi Cardoso, had announced during the same meeting that Nigeria’s foreign reserves hit $40.2 billion in October 2024 from $38.4 billion reported in September.

The minister said the growth in reserves was the result of the government’s decision to stop defending the naira through heavy interventions; instead of the Central Bank of Nigeria’s (CBN) defending, it has led to the organic growth of the gross reserves.

Edun explained that in the past, billions of dollars were spent monthly to prop up the naira, a practice that drained the country’s reserves.

“The gross reserves are being built organically, mainly because we’re just not defending the naira, as used to happen in the past. A billion dollars every month just to defend the naira,” Edun said.

Under the new approach, Edun said the federal government is allowing the market to play a greater role in setting the exchange rate for the naira.

This, Edun noted, has not only contributed to the organic growth of reserves but also helped boost investor confidence.

“We’re allowing the market as much as possible to set the level for the naira, and we are building the buffers to improve that confidence and ensure that we have enough input cover.”

According to Edun, the government’s goal is to increase the supply of foreign exchange organically, without heavy intervention from the Central Bank of Nigeria (CBN).

He added that, while the CBN may continue to intervene in the market from time to time, the ultimate goal is to achieve a stable exchange rate without relying on central bank interventions.

“We’re trying as much as possible to improve our supply organically without the central bank having to put in money all the time. And so we’re trying to get to a level where that stability is there without the central bank intervening or the market depending on the central bank.”