April 2, 2025/CSL Research
Nigeria’s net foreign exchange reserves (NFER) have surged to their highest levels in over three years, reflecting the success of recent measures implemented by the Central Bank of Nigeria (CBN) to bolster its financial buffers. According to a statement released by the CBN on Tuesday, NFER stood at US$23.11bn at the end of December, 2024—marking a significant rise from US$3.99 billion at the end of 2023, US$8.19 billion in 2022, and US$14.59 billion in 2021.
Since assuming office, CBN Governor Olayemi Cardoso has introduced key reforms aimed at restoring investor confidence and attracting capital inflows. These initiatives have contributed to a notable increase in the country’s external reserves. As of December 2024, gross reserves reached US$40.19 billion, up from US$33.22 billion at the end of 2023, though they later declined to US$38.35 billion as of March 20, 2025.
While Nigeria’s external reserves are supported by various sources such as foreign remittances, foreign currency loans, and yields from foreign assets, the primary inflow comes from crude oil sales. Global oil prices have remained relatively stable in recent years, influenced by geopolitical events such as the Russia-Ukraine war and the Israel-Gaza conflict.
However, Nigeria has struggled to fully capitalize on these stable prices due to declining oil production, largely driven by crude oil theft and deteriorating infrastructure. In response to ongoing FX challenges, the Cardoso administration has introduced several policies aimed at fostering a more transparent foreign exchange market.
Nigeria’s current account surged to 7.1% of GDP by the end of Q3 2024, significantly higher than 1% of GDP in the corresponding period of 2023. This was driven by a trade surplus and increased remittance inflows, with the trade sector benefitting from elevated oil prices which helped offset the impact of weaker oil production during the review period. This positive current account balance has contributed to the growth of FX reserves and improved liquidity in the foreign exchange market. Looking ahead, we expect the current account balance to remain positive despite ongoing challenges. Exports of refined petroleum products are set to gain momentum in 2025, with neighbouring countries likely to become key buyers of refined crude from the Dangote refinery, further strengthening trade and external balances.
We project that Nigeria’s FX reserves could range between US$41.00 billion and US$43.00 billion in 2025, supported by a sustained current account surplus. However, fiscal risks remain, particularly if oil prices or production decline. A prolonged downturn in either could widen the fiscal deficit, reduce foreign currency earnings, and put pressure on external reserves.
Despite these risks, Nigeria’s macroeconomic fundamentals remain broadly favourable, underpinned by ongoing economic reforms. Additionally, the prospect of U.S. interest rate cuts could improve the government’s ability to access international capital markets later this year—an important step toward strengthening FX reserves and managing the country’s debt maturity profile.
Click here to download full report: CSL Nigeria Daily – 02 April 2025 – FX reserves.pdf
