The Central Bank of Nigeria has provided clarity on the recent significant drop in the country’s foreign exchange reserves, stating that it was primarily due to repaying debts owed to creditors rather than solely defending the naira.

Speaking at the ongoing International Monetary Fund/World Bank Spring Meetings in Washington D.C, United States, CBN Governor Olayemi Cardoso emphasized the bank’s intention to reduce its market interventions, advocating for a system where prices are determined by the interaction of buyers and sellers.

Cardoso addressed concerns regarding the decline in foreign reserves, which decreased by approximately $2.16 billion in 29 days, reaching $32.29 billion by April 15, 2024, down from $34.45 billion on March 18, 2024. He attributed the earlier increase in reserves to various factors such as remittance payments and increased interest from foreign investors.

Contrary to popular belief, Cardoso clarified that the recent decrease in reserves wasn’t aimed at defending the naira. He stated, “It is not in our intention to defend the naira.” Instead, he highlighted the importance of a vibrant currency market with sufficient liquidity and minimal intervention.

Cardoso assured that an increase in reserves is expected soon, with an additional $600 million set to be added. He explained that fluctuations in reserves are typical, influenced by factors like debt repayments and incoming funds.

Regarding forex liquidity, Cardoso revealed a substantial increase, with daily transactions reaching a minimum of $1 billion within six months of his tenure, compared to $200-300 million per month in previous administrations.

Acknowledging the challenges faced upon assuming office, Cardoso affirmed the government’s commitment to addressing rising inflation. He mentioned the discontinuation of using Ways and Means, thanks to collaboration between the CBN and the Ministry of Finance.

Cardoso reiterated the CBN’s commitment to a market-driven exchange rate system, emphasizing transparency and minimal intervention unless under exceptional circumstances.