Nigeria needs to be cautious about the use of its foreign exchange reserves, according to the International Monetary Fund (IMF).
IMF added that oil prices could decline at any time.
The nation’s external reserves have been declining in recent months, falling fell to $44.30bn on September 28 from $45.83bn at the end of August. The reserves dropped further to $43.52bn on Tuesday, October 9.
The Head, Emerging Economies Regional Studies Division at the IMF’s European Department, Anna Ilyina, at the ongoing Annual General Meetings of the IMF/World Bank in Bali, Indonesia, said Nigeria and other emerging market nations had come under pressure since April.
She warned that the advanced economies’ interest rate hikes were still at the early stages, adding that Nigeria should be cautious on the use of its external reserves now as global external conditions remained challenging.
She said, “A combination of factors has basically affected emerging market since then. It started with sharp appreciation in dollar due to rising interest rates in US. In the case of Nigeria, there is one important driver that always affects its economic condition and that is oil.
“Foreign exchange intervention might make sense in certain circumstances. But then, one has to consider the growth in fundamentals, the level of reserves and other policy tools that might be more appropriate in country-specific circumstances.”