Nigeria’s External Reserves Hit 8-Month Low Amid Foreign Debt Payments and FX Market Interventions

Nigeria’s external reserves have fallen to their lowest levels in eight months, reaching $37.9 billion by the end of April 2025. This marks a $375 million drop compared to March 2025, reflecting a continuous decline for four consecutive months. The decrease is largely attributed to the central bank’s foreign exchange (FX) sales and foreign debt servicing obligations. These pressures have left the reserves down by nearly $2.9 billion year-to-date, a significant dip from the $40 billion reserves reported at the close of 2024.

The Central Bank of Nigeria (CBN) has been actively intervening in the FX market, injecting $200 million to stabilize the naira amid rising tariffs and a decline in oil prices. Analysts have noted that the slowdown in portfolio investor inflows contributed to the central bank’s increased dollar sales. Foreign Portfolio Investment (FPI) inflows saw a sharp decline in April, further depleting the country’s reserves as investors moved to safer assets due to global uncertainty.

Despite the persistent challenges, there is a glimmer of hope. The reserves saw a modest recovery in early May 2025, with an increase of around $163 million by May 6. This small uptick, though encouraging, comes with caution as oil price fluctuations continue to pose risks. As of April, Nigeria’s reserves could cover 9.5 months of merchandise imports and 7.9 months of services, according to the most recent Balance of Payments data.

FBNQuest Merchant analysts caution that Nigeria’s reserve position remains vulnerable due to external factors such as weak oil price prospects, OPEC+ supply uncertainty, and broader global economic pressures. However, early data from May suggests a potential stabilization, though analysts remain cautious about future volatility.

In light of these challenges, CBN Governor Olayemi Cardoso has reassured both domestic and foreign stakeholders that the central bank remains committed to market stability. He emphasized that Nigeria has managed to limit the impacts of global oil price fluctuations and tariffs, partly due to the CBN’s transparent approach and market resilience-building efforts.

SOURCE: Business day