Segun Aremu, a financial expert, stated that the increase in Nigeria’s Foreign Exchange Reserve and its growing debt are not necessarily linked but may intersect in the long run.
Segun made these comments in an exclusive interview with our correspondent in response to reports that Nigeria’s foreign exchange reserves had reached $33.58 billion – the highest since March 28, 2024 – and that Nigeria’s national debt, according to the DMO, was $87.91 trillion in Q3.
Commenting on Nigeria’s Foreign Exchange Reserve, Segun said “What has been happening so far so good is that the federal government and the Central Bank (CBN), have been implementing some foreign exchange and monetary policies, which have yielded results.
‘’When we are talking about things like this you are looking at the fact that what has been the inflows that have come into our balance of payment system. And you would discover that we must have had some good oil sales, some exports which have increased and have brought in revenues.
Speaking further, Segun said: “We also need to look at the spending part as well, which is the expenditure part that allows the funds to go out which is under import.
‘’Some items are being controlled, meaning that people are not requesting the US dollar to get this transaction.
”When it comes to situations where people need to obtain US dollars, for example, you can see how Dangote selling diesel might help alleviate the impact on the USD. People are purchasing diesel from Dangote Refinery instead of buying from foreign sources. This in turn reduces the demand for US dollars in import transactions.
‘’That means that the funds we are getting from our exports are increasing coupled with the fact that there have been some policies to regulate the FX market which is now yielding its fruit.
‘’Again, there will be a reduction in the number of people demanding forex, which will always have a positive influence on us as a country.
On Nigeria’s rising debt, He cautioned Nigeria about its escalating debt, “Every country borrows at some point. Foreign debt may seem appealing, but most of this debt comes from Eurobonds and is long-term in nature.
‘’Recently, Nigeria has also requested loans from the IMF. The debt will surely increase, and the more it increases, the less beneficial it is for the country, as it means we will continue to use our revenue to service the debt, which is not ideal.’’
Meanwhile, he opined that the debt could have immense benefits and multiple effects if properly harnessed “They are getting loans in dollars which can also boost investment in the domestic economy. It can therefore boost people’s confidence in the economy, especially foreign investors.
‘’So when we get such an investment in USD, it will reduce pressure on our exchange rate as well.
‘’Also, when such funds that are being borrowed are being invested into the country, it gives a multiplier effect. For example, if you have a dollar in Nigeria, that means automatically you have about #1400, when this is multiplied by $1,000,000 that is to tell you that it comes to the country the multiplier effect will be very large such that you cannot now use the money to do a big project that can generate enough revenue that will take care of this debt.
‘’But then, the fact that the debt is increasing does not mean that the foreign reserves should not increase because they are not mutually exclusive.it is not that they are interdependent.
‘’Also, they are two different things entirely, the factors that cause the FX reserve to increase, are different from the factors that cause debt to increase. Even though they thought they could have a place where they could interplay.
‘’But basically, that is what I think about this whole issue. And hopefully, I believe that as a country we should work on reducing our debt because what we have now is very huge.
‘’We potentially leave debt for the unborn. Debt will hang on their lives because they will keep paying debts on the things that their forefathers have used how to solve that challenge is for the government to deploy every bond appropriately such that it generates the desired revenue and brings about the desired project so that it can cover for the debt”
