By Chinwendu Obienyi
Nigeria’s foreign exchange reserves ended August higher, rising to $41.3bn as improved oil receipts, a moderation in demand pressures and renewed offshore investor inflows provided support for the country’s external buffers.
Data from the Central Bank of Nigeria (CBN) at the weekend showed reserves grew by $600mn compared with July’s close of $40.7 billion, marking the fourth consecutive monthly gain and the highest level since May 2023.
Analysts said the increase reflects both stronger crude oil exports and the impact of recent policy measures aimed at stabilising the naira. The CBN has intensified efforts this year to restore confidence in Nigeria’s currency markets following a series of reforms that included unifying multiple exchange rates and tightening monetary policy.
Those moves have helped attract portfolio investors back into local debt markets, contributing to a steadier supply of dollars. Vice Chairman, Board at Highcap Securities, David Adonri, said, “Reserves are gradually rebuilding, which is critical for Nigeria’s ability to meet its external obligations and defend the naira against speculative attacks. The improvement signals a return of some stability, though the pressure points remain.”
Nigeria relies heavily on crude oil exports for foreign exchange earnings, but output had been constrained for much of 2023 due to theft, pipeline vandalism, and underinvestment. In recent months, however, official production figures have inched higher, boosted by improved security in the Niger Delta and increased investment by international oil companies. Average daily production stood at 1.53mn barrels in August, compared with 1.47mn in July, according to the Nigerian Upstream Petroleum Regulatory Commission.
Stronger oil receipts combined with relatively subdued imports in the non-oil sector helped reduce the overall FX demand burden, market participants said. The CBN has also tightened scrutiny of FX applications to curb round-tripping and speculative activity.
Despite the positive trajectory, economists caution that Nigeria’s reserves remain vulnerable to global market volatility, particularly given the fragile state of the oil market. Brent crude prices rose above $85 a barrel in late August, but concerns persist over demand growth in China and the impact of US monetary tightening on emerging market inflows.
Chief Economist, Africa and the Middle East at Standard Chartered, Razia Khan, said “the $41.27 billion provide a cushion, but they are still modest relative to Nigeria’s import bill and debt service requirements. Sustained growth will depend on deeper structural reforms that diversify FX earnings beyond oil.”
Meanwhile, the naira, however, slipped 0.9 per cent week-on-week to N1,534/$1 in the official window, pressured by elevated demand from importers and investors, as well as participation in the CBN’s open market operations. The central bank also sold $170 million to banks during the week to help meet market demand.
In the forwards market, the currency fared better, with contract rates appreciating across all tenors, reflecting expectations of improved stability. One-month forwards strengthened 0.3 per cent to N1,572.96/$1, three-month contracts gained 0.6 per cent to N1,644.11, six-months rose 1 per cent to N1,745.84, and one-year agreements advanced 1.4 per cent to N1,948.07.
Speculations amongst analysts say that the naira is expected to remain stable, underpinned by robust FX liquidity and an efficient FX market.
According to Cordros Research, the firm expects sustained inflows from foreign portfolio investors (FPIs) due to existing carry trade opportunities and stronger market confidence. “Additionally, improving non-oil exports, as well as limited incentives for naira speculation, are expected to reinforce steady inflows from domestic sources”, the investment firm said.
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