The Decline Of The Dollar: Implications For Nigeria'S Foreign Reserves

Abstract

Nations rise and fall according to the trends of their economies. For it is the
economic growth of a nation that confers on it, its status among the comity of
Nations. Since the end of World War II, the American economy has led the world in terms of trade, manufacturing, innovation, finance etc. Hence the American state became the leading nation in the world and the dollar, the de-facto currency most sought after as a means of lubricating trade and storage of wealth. However, over the last decade there has been a gradual slow down in the American economy; growth has petered down and the status of the dollar among international currencies is on the decline. Will the dollar lost its dominant role in international transactions as a reserve currency? This paper notes that it will happen, albeit slowly. Hence, it purports to highlight the demerits of maintaining our external reserves in a single currency (Dollar).Drawing heavily from existing literature on external reserves management and exchange rate, It suggests that the monetary
authorities should start a gradual divestment from purely dollar denominated
securities to securities denominated in other currencies .Only the optimal level of reserves should be kept by the authorities while the excess should be used for infrastructural development, as well as institute A Sovereign Wealth Funds to manage the revenue from sales of crude oil for future generations; among others.