Nigeria’s FX Reserves Surge $4.1bn on Oil Boost, Inflows

Nigeria’s external reserves climbed by $4.1 billion over the past two months, supported by stronger crude oil output and increased foreign exchange inflows.

Central Bank of Nigeria (CBN) data showed reserves at $41.3 billion as of August 25, marking a $1.9 billion month-on-month rise after gaining $2.1 billion in July. Despite the gains, year-to-date growth is modest at $390 million, with reserves only recently recovering from a low of $37.2 billion in July.

Analysts at FBNQuest link the buildup to crude production averaging 1.7 million barrels per day, higher non-oil exports, increased foreign portfolio investments, and inflows from non-bank corporates, bolstered by high interest rates.

Nigeria’s reserves currently cover 12.4 months of merchandise imports or 8.6 months when services are included. However, net reserves stood at $23.1 billion as of December 2024, offering a more cautious measure of liquidity.

Weekly inflows into the FX market have slowed. Coronation Merchant Bank reported inflows of $567.2 million last week, down from $706.7 million previously. Portfolio inflows led with $184.1 million (32.5%), followed by CBN interventions at $173.1 million (30.5%). Exporters and corporates contributed 16.6% and 16.2%, respectively.

The naira gained 1.1 per cent in the official market, closing at N1,514.87 per dollar, while holding steady at N1,540 in the parallel market. FBNQuest also noted similar upward movements in reserves for South Africa ($65.9 billion) and Egypt ($49.3 billion).

With Nigeria’s recent reserve growth and the naira’s modest strengthening, analysts believe further capital inflows could materialise if the US Federal Reserve softens monetary policy in response to slowing employment data.