The Central Bank of Nigeria (CBN) has raised concerns that the removal of fuel subsidies, rising import bills, and increased external debt servicing obligations could pose risks to the growth of Nigeria’s external reserves by 2024/2025. These insights were disclosed in the CBN’s Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for fiscal years 2024/2025.
Despite these challenges, the CBN maintained an optimistic outlook for Nigeria’s external sector, citing sustained crude oil prices, improved domestic oil production, and favorable terms of trade as key factors. Additionally, the CBN expects positive economic growth based on policy support for agriculture, oil sector reforms, improvements in the foreign exchange market, and the successful implementation of the 2023 Finance Act and the 2022-2025 Medium-Term National Development Plan (MTNDP).
However, the CBN warned that challenges such as lower crude oil earnings, the impacts of fuel subsidy removal, and tighter global monetary policies may lead to capital outflows and undermine reserves. Security and infrastructure challenges, rising energy prices due to the Russia-Ukraine conflict, and other global headwinds also pose downside risks to Nigeria’s economic outlook.