Nigeria’s net foreign assets at lowest since 2015


Nigeria’s net foreign assets (NFA) fell to 4.8 trillion naira in July 2022, the biggest month-on-month decline since 2019 and the lowest level since 2015.

The data was obtained from the Central Bank of Nigeria (CBN) website which has been tracking Nigeria’s money supply since 1960.

Net foreign assets represent the difference between foreign assets held by the central bank and the banking system and liabilities respectively. A positive net foreign asset indicates that the central bank and commercial banks have more foreign (liquid) assets than foreign liabilities.

What the data says

In July, Nigeria’s net foreign assets fell from 7.1 trillion naira to around 4.8 trillion naira, representing a month-on-month decline of 2.24 trillion naira.

  • The last time Nigeria’s net foreign assets fell below 5 trillion naira was in October 2015 when it fell to 4.6 trillion naira.
  • Nigeria’s NFAs have hovered between 6 trillion and 10 trillion naira since December 2019, when the country recorded the last major decline.
  • In December 2019, Nigeria’s NFA fell from 14.1 trillion naira to around 5.8 trillion naira, preceding a massive outflow of currency from the country as oil prices fell and the world prepared for the pandemic. of Covid-19.
  • NFA had fallen to 7.56 trillion naira in March 2022, a ripple effect of the global crisis caused by the Russian-Ukrainian fallout, and has since continued its downward trend.

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Why the fall

The central bank data did not reveal the reasons for the decline in NFA, however, sources who spoke to Nairametrics suggested that it could be due to an increase in foreign liabilities.

  • Foreign assets often refer to central bank reserves and bank loans denominated in foreign currencies.
  • However, a large portion of these balances come from central bank reserves and since reserves have not changed significantly, the reason is liabilities.
  • An increase in external liabilities could then mean that the central bank or the banking system borrowed more from the debt market, either through bonds or simply through direct on-lending facilities.

Reacting to the decline suffered in December 2020, the CBN’s Monetary Policy Committee reported in March 2020 that the decline reflected a “headline decline” outside of stocks and currencies.

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  • “The MPC observed that broad money supply (M3) contracted for the second consecutive month by 2.29% (year-to-date) in February 2020, reflecting the decline in net foreign assets and net domestic assets. More specifically, the contraction of M3 is mainly explained by a decline in securities other than shares and currencies other than depository corporations during the period under review. Overall net credit, however, increased by 1.34% in February 2020.”

Another African country, Egypt also reported a significant decline in its net foreign assets. This fell to a negative 221.3 billion Egyptian pounds in the first quarter of 2022, representing the sixth month of decline from a surplus of 186.3 billion pounds recorded in September 2021.

According Reutersthe decline is attributable to a large currency outflow due to economic uncertainties following Russia’s invasion of Ukraine in February 2022.

Meanwhile, Nigeria’s money supply declined slightly for the second consecutive month following the CBN’s interest rate hike in May 2022. Specifically, the money supply fell to 48.26 trillion naira in July 2022, compared to 48.51 trillion naira recorded the previous month.

What does that mean

A decline in net foreign assets often indicates a potential currency challenge, as it could mean fewer foreign exchange reserves or assets needed to meet a country’s liabilities or future liabilities such as the ability to pay the imports.


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