THE naira posted modest gains across Nigeria’s foreign exchange markets on Monday, supported by a sharp improvement in the country’s external buffers, with official reserves rising to an eight-year high of $46.01 billion.
The stronger reserve position has helped ease liquidity pressures in the FX market and reinforced confidence in the local currency.
Data released by the Central Bank of Nigeria (CBN) showed that the naira appreciated slightly at the Nigerian Foreign Exchange Market (NFEM), where the dollar was quoted at N1,418.95. This represented a marginal improvement from the previous close of N1,421.63 on Friday, indicating that the local currency gained N2.68 against the greenback within one trading session.
A similar trend was recorded in the parallel segment of the market. Street traders in Lagos and Abuja said the naira exchanged at about N1,475-N1,485 per dollar.
The improvement in the naira coincided with a significant rise in Nigeria’s foreign currency reserves. According to the CBN figures, gross external reserves reached $46.01 billion as of January 22, 2025. This marks the highest level recorded in eight years, with the last comparable figure seen on August 24, 2018, when reserves stood at $46.09 billion.
“Economics is not a rocket science,” said a Lagos-based economist, Mr Collins Nwaegbo.
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“When certain things happen, some other events also occur. Currently, the stability of the naira is driving foreign exchange (FX) inflows into the Nigerian economy. Investors are confident to bring in their money. Secndly, the giant Dangote refinery has reduced FX demand and even brought in FX from petrol exports. These explain why the reserves are rising. No one is tampering with the reserves.”
The CBN believes the stronger reserve position provides a more solid foundation for exchange rate stability in the medium term. In its outlook, it projects that the NFEM exchange rate will average N1,451.63 per dollar in the fourth quarter (Q4) of 2025, before improving further to around N1,400 per dollar in 2026.
These projections are premised on expectations of better FX market efficiency, rising capital inflows, a current account surplus, and a gradual recovery in domestic economic activity.
Further analysis of the external reserves data showed that Nigeria’s gross official reserves increased by $834.2 million on a month-on-month basis, closing the 2025 financial year at $45.5 billion. On a year-on-year basis, reserves recorded an even stronger expansion of $4.6 billion, reflecting improved FX inflows over the course of the year.
In the first six months of the year, reserves came under pressure due to elevated external debt service obligations, which led to a drawdown of about $3.7 billion. By the end of June 2025, reserves had declined to roughly $37.2 billion, raising concerns about the sustainability of Nigeria’s FX position.
However, the situation improved markedly in the second half (H2) of the year. Reserves rebounded strongly, supported by renewed interest from offshore investors attracted by improved macroeconomic conditions and reforms in the FX market. Additional inflows came from higher FX receipts, diaspora remittances, and proceeds from debt issuances amounting to about $2.4 billion. Part of these funds was used to refinance the $1.2 billion Eurobond that matured in November 2025, helping Nigeria avoid excessive pressure on reserves.
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These developments strengthened Nigeria’s external buffers and contributed to a relatively stable FX environment towards the end of the year. Although foreign portfolio inflows slowed in the final months of 2025, overall inflows for the year remained robust. Data showed that offshore investor inflows nearly doubled to $16.9 billion in 2025, compared with $8.6 billion recorded in 2024.
On the oil sector front, Nigeria’s crude oil production also improved in 2025. Average output rose to 1.45 million barrels per day excluding condensates, and 1.64 million barrels per day including condensates. This marked an increase from the 2024 averages of 1.35 million barrels per day and 1.56 million barrels per day, respectively, reflecting better operational performance in the sector.
But the impact of oil-related FX inflows on reserves may be limited by softer global oil prices in 2025. Oversupply conditions and weakening global demand are expected to weigh on prices, potentially constraining the benefits of higher production volumes.
Remittance inflows remained relatively resilient during the year. The CBN’s Quarterly Statistical Bulletin, though reported with a lag, showed that remittances through International Money Transfer Operators amounted to $2.1 billion by the end of June 2025, only slightly below the $2.3 billion recorded in the same period of the previous year.
