Nigeria’s gross foreign exchange (FX) reserves have seen a slight recovery, rising by $12.06 million to $38.36 billion as of March 12, 2025, after a nine-week decline. This rebound comes on the heels of significant depletion in reserves, including a $1.31 billion drop in February 2025. Despite this improvement, reserves remain under pressure due to external debt obligations, forex market interventions, and fluctuating oil revenues. Year-on-year, FX reserves have seen a notable 12.73% increase, compared to $34.02 billion in 2024.
However, Nigeria’s monthly reserve trends have been volatile, with sharp declines observed in January and February 2025 due to rising forex demand and lower oil earnings. The nation’s currency, the naira, also experienced a 1.3% depreciation against the dollar at the official market, closing at N1,537.50/$1, despite the Central Bank of Nigeria (CBN)’s intervention in selling $360 million to stabilize the market. This intervention aimed to mitigate further devaluation amid increased demand for foreign currency.
In the forwards market, the naira continued to weaken across multiple time frames, including 1-month, 3-month, 6-month, and 1-year contracts, all showing declines in value. The CBN’s active role in forex market intervention has been a crucial factor in depleting the nation’s reserves. Nevertheless, analysts caution that persistent challenges such as lower oil prices could continue to constrain net FX inflows from foreign portfolio investments (FPIs), keeping pressure on the naira.
Looking ahead, the CBN projects gradual growth in FX reserves in 2025, contingent on an expected increase in oil output and ongoing economic reforms to attract foreign capital. Analysts from Cordros Research highlight that while market interventions will prevent a sharp depreciation of the naira, lower oil receipts and global price volatility will likely weigh on the country’s currency stability in the short term.
SOURCE: THE SUN