JPMorgan analysts have suggested that the Central Bank of Nigeria (CBN) may reduce its pace of absorbing foreign inflows into its reserves, a move that could support the naira, which recently hit its strongest level in nearly a month. This change could help the naira to end 2025 at around N1,450 to the dollar, JPMorgan projects. The US bank’s forecast comes as the CBN’s efforts to build up its reserves show positive results, with the Nigerian economy becoming an increasingly attractive option for investors in frontier markets.
Nigeria’s net foreign reserves have surged to $23 billion, a significant increase from $3.99 billion in 2023. Gross reserves also rose to $40.9 billion in 2024, up from $33 billion the previous year. JPMorgan noted that this growth, driven by central bank interventions, should alleviate some of the pressure on the naira, especially as the CBN may shift its focus away from aggressively absorbing foreign inflows. The bank considers this shift a “market-friendly” development, even as transparency regarding Nigeria’s foreign liabilities remains limited.
In addition to changes at the CBN, JPMorgan highlights the recent reconstitution of the Nigerian National Petroleum Company (NNPC), which has been seen as a significant step toward improving the country’s oil sector. With the appointment of Bayo Ojulari, former Shell MD, as the new head of NNPC, the bank believes that the restructured oil company will play a crucial role in boosting output and supporting refinery operations. This aligns with Nigeria’s broader oil reforms, such as the implementation of the Petroleum Industry Act and the removal of oil subsidies.
The NNPC’s reforms are expected to improve transparency and the flow of oil revenues into the government, which could ultimately strengthen the country’s financial position. While an immediate surge in oil production is not expected, the company is pursuing an Initial Public Offering (IPO) and negotiating a new medium-term foreign exchange financing arrangement. This could secure up to $9.5 billion in new financing, which would be used to clear fuel import arrears and contribute to rebuilding Nigeria’s FX reserves.
Source: Business day