March 4, 2026/CSL Research
The Governor of the Central Bank of Nigeria (CBN) Olayemi Cardoso revealed that the net external reserves, which exclude short-term foreign currency obligations, grew by about 50.5% year-on-year (y/y) to US$34.8 billion by the end of last year. Complementing this, the gross external reserves rose to US$50.5 billion in mid-February this year, the highest in recent years.
We connect the sharp improvement in net external reserves to deliberate efforts by the apex bank to reduce its foreign exchange liabilities. As we had reported previously, authorities had been settling its foreign exchange exposures, including legacy derivatives contracts and swap positions with domestic banks (see CSL Flash Note: “CBN financials reflect aggressive liquidity measures to tame inflation and support the Naira”, 05 May 2025). Asides these efforts, we note that improving macroeconomic fundamentals has contributed to the upturn in the external reserves. Notably, we estimate that the current account balance could have settled around US$13.5 billion in 2025, aided by a positive trade balance and resilient remittances.
We expect the gross external reserve to average around US$49 billion this year. A key driver for short-term performance is the current rise in crude oil prices, triggered by the US-Iran conflict, which we believe should bolster foreign currency earnings and the performance of the current account. In addition, Nigeria’s potential re-entry into major global fixed income and equity indices could help unlock sizeable investment inflows, with a positive accretion to the external reserves.
Going forward, we believe it would be beneficial for authorities to provide more frequent and detailed disclosures on movements in net external reserves. Greater clarity on reserve composition would strengthen market confidence, particularly among foreign portfolio investors who closely monitor external liquidity metrics when assessing sovereign risk.
Click here to download full report: CSL Nigeria Daily – 4 March 2026 – Economy.pdf
