Market News

Latest rise in reserves highest in 44 months

By Bukola Aro-Lambo

Nigeria’s external reserves have surged to $41 billion, marking the highest level in four years and signalling a promising boost for the country’s economic stability and currency strength.

According to the latest data released by the Central Bank of Nigeria (CBN), Nigeria’s foreign exchange reserves stood at $41.046 billion as of 20 August 2025 — the highest they have been since 2 December 2021.

Since the end of 2021, the reserves have been on the decline as the apex bank dipped into them to support the naira, depleting the total to nearly $31 billion last year before it began a steady accretion on the back of various CBN reforms.

According to analysts, the various foreign exchange reforms, including efforts to clear the forex backlog, have boosted investor confidence in the Nigerian economy, as foreign exchange inflows continue to rise.

CBN data showed that while reserves had risen by only 0.39 per cent year-to-date (from $40.883 billion as of 2 January), much of the accretion occurred in August. From $39.54 billion on 1 August 2025, the reserves had risen by $1.5 billion, or 3.8 per cent, within just 20 days.

Commenting on the development, the Chief Executive of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the significance of the reserves’ growth lies in attracting investment and fostering a resilient economy.

“When you have robust reserves, it strengthens the currency and ensures stability. It also builds both domestic and foreign investors’ confidence that this is a healthy economy — good for investment, the government, and the overall corporate environment,” he said.

The increase in foreign reserves is crucial in enabling Nigeria to meet its external financial obligations, which Dr Yusuf emphasised as vital for attracting investment. He also highlighted the role of strong reserves in stabilising the exchange rate, thereby helping to moderate inflation by reducing the risk of currency depreciation.

“If the exchange rate is not weakening, the likelihood of inflation decelerating also increases,” Dr Yusuf explained.

He described the recent reserve growth as “a very positive development for the economy and an indication that some of the administration’s economic reforms are beginning to yield results.”

Also speaking, the head of Financial Institutions Ratings at Agusto & Co, Ayokunle Olubunmi, noted that the substantial accretion in reserves was “the result of the various reforms of the CBN aimed at sanitising the forex market and making Nigeria attractive to portfolio investors.”

The CBN embarked on exchange rate unification to minimise arbitrage opportunities and reduce volatility in the foreign exchange market. It cleared over $7 billion of the verified backlog of forex forwards and launched the Nigeria Foreign Exchange (FX) Code to ensure that the market complies with global best practices.

CBN Governor Olayemi Cardoso assured of further accretion in reserves at the last Monetary Policy Committee meeting, saying, “We have done what we should do, which is act as a catalyst to ensure that this happens. And it is happening. It is beginning to happen. Believe me, the numbers are showing us it is beginning to happen.”

Olubunmi also noted that elevated yields on treasury securities and periodic Open Market Operation (OMO) auctions have helped attract portfolio investors. He said the good returns on listed equities had also lured investors, while crude oil prices have remained positive, supported by healthy production volumes in Nigeria.

LEADERSHIP last month quoted analysts’ projections that the reserves would rise above $41 billion before the end of 2025.

Analysts at CardinalStone, in their mid-year outlook, attributed the rise in FX reserves to the federal government’s plans to raise a combined $3.2 billion in the second half of the year to meet some of its fiscal priorities. Inflows from portfolio investors are also expected to support this projection.

“These proposed external borrowings, alongside other anticipated inflows, will likely boost the FX reserves to $41.00 billion by year-end, compared to $37.27 billion as of H1’25,” the Lagos-based research and investment firm said in its report.

Meanwhile, the naira regained some of its losses as it appreciated slightly to sell at N1,535.78 to the dollar at the NFEM on Thursday, compared to N1,536.73 on Wednesday. The naira remained stable at the parallel market, trading between N1,550 and N1,545 to the dollar.

With foreign exchange inflows improving, analysts at FBNQuest Merchant Bank noted a cautious return of foreign investor confidence, influenced by robust carry trade opportunities and stable global macroeconomic conditions during the period.

“The sustained dominance of FPIs as a key source of forex supply highlights Nigeria’s dependence on short-term capital flows to sustain market liquidity. While this can provide immediate support, it also introduces significant vulnerability, as FPIs are highly sensitive to shifts in global risk appetite, interest rate dynamics, and domestic macroeconomic conditions,” it said.