Fitch Ratings has raised alarms over Nigeria’s precarious external reserves, stating that it underscores the country’s susceptibility to external risks and policy difficulties. This vulnerability is attributed to recent setbacks in reform initiatives and limitations on reserve holdings.
Fitch Ratings voiced apprehension regarding the recent financial disclosures made by the Central Bank of Nigeria (CBN). While it welcomed the increased transparency resulting from the release of the CBN’s audited financial statements after seven years, the rating agency noted that there are still critical gaps preventing a reliable evaluation of the net reserve position.
The agency highlighted uncertainties surrounding various financial aspects, including securities lending, foreign currency forwards, and off-balance-sheet commitments. These ambiguities could influence Nigeria’s exchange-rate liberalization progress and investor sentiment.
Furthermore, Fitch emphasized that Nigeria’s gross foreign reserves experienced a decline of $3 billion between January and August 2023, culminating in a total of $34 billion. This accounts for roughly 4.1 months of current external payments, underscoring the necessity for prudent management of external challenges.
The recent disclosure by the CBN also revealed significant financial obligations to JP Morgan, Goldman Sachs, and other entities, further contributing to concerns about Nigeria’s economic stability. Fitch Ratings maintained Nigeria’s rating at ‘B-‘ with a Stable Outlook in May, reiterating that the country’s external finances remained a source of worry.