Nigeria’s foreign assets (NEA) fell to N4. 8 trillion in July 2022, the biggest monthly drop since 2019 and the lowest point since 2015.
Knowledge received from the central bank of Nigeria (CBN) online page that has been tracking Nigeria’s cash source since 1960.
Net foreign assets constitute the difference between foreign assets held through the central bank and the banking formula and liabilities, respectively. Positive external assets imply that the central bank and advertising banks have more external (liquid) assets than external liabilities.
In July, Nigeria’s foreign assets fell from 7. 1 trillion naira to around 4. 8 trillion naira, representing a monthly decline of 2. 24 trillion naira.
The central bank’s knowledge revealed the reasons for the decline in NFAs, however, resources that spoke to Nairametrics warned that this may be due only to an accumulation of external liabilities.
In reaction to the December 2020 drop, CBN’s Monetary Policy Committee reported in March 2020 that the drop reflected a “decline in values” outside of stocks and currencies.
Another African country, Egypt, also reported a significant decline in its foreign assets. This fell to a negative value of 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 to Reuters, the drop is attributed to the outflow of foreign exchange due to economic uncertainties that followed the Russian invasion of Ukraine in February 2022.
Meanwhile, Nigeria’s cash source declined for a month in a row, following the accumulation of the CBN interest rate in May 2022. Specifically, the cash source fell to N48. 26 trillion in July 2022, from N48. 51 trillion recorded last month.
A decline in net foreign assets indicates a potential currency challenge, as it can mean fewer foreign exchange reserves or assets needed to meet a country’s liabilities or long-term liabilities, such as the ability to pay for imports.
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