Reserves movement data from the Central Bank of Nigeria (CBN), showed the country’s external reserves declined to US$38.74bn as of February 20, 2025, marking a 5.3% decrease (US$2.1bn) from the year high of US$40.92bn recorded on January 6, 2025.
This decline may be attributed to the CBN’s efforts to settle a portion of its 361-day Open Market Operations (OMO) and 364-day Treasury bill obligations owed to foreign portfolio investors (FPIs), with maturities between January 6 and March 27, 2025.
Additionally, the depletion in reserves could be linked to the CBN’s interventions to stabilize the Naira, particularly through clearing foreign exchange (FX) backlogs for profit repatriation via the official market.
While Nigeria’s external reserves are supported by various sources such as foreign remittances, foreign currency loans, and yields from foreign assets, the primary inflow comes from crude oil sales.
Global oil prices have remained relatively stable in recent years, influenced by geopolitical events such as the Russia-Ukraine war and the Israel-Gaza conflict.
However, Nigeria has struggled to fully capitalize on these stable prices due to declining oil production, primarily driven by crude oil theft and deteriorating infrastructure.
In response to ongoing FX challenges, the PBAT administration has introduced several policies to foster a more transparent foreign exchange market.
Despite these efforts, FX pressures have persisted, leading to a significant depreciation of the Naira in 2023 and 2024.
However, since the beginning of 2025, the Naira has shown signs of appreciation and relative stability, closing at N1,501/US$ on 21 February 2025.
The future trajectory of Nigeria’s external reserves will largely depend on policy adjustments and prevailing market conditions. Oil revenues could gradually recover if the Federal Government and the CBN successfully implement reforms to boost oil production and improve operational efficiencies.
However, the organic contribution of oil exports to reserve accumulation remains weak, as much of the reserves’ growth has been driven by multilateral inflows, external debt issuances, and foreign portfolio investments—sources that could dwindle as maturities come due.
Streamlining FX market interventions and strengthening fiscal management could also help slow the pace of reserve depletion, ensuring greater stability in the country’s external reserves (see chart below).
