Nigeria’s External Reserves Falls Amid Debt Repayment to China, IMF, World Bank

• Nigeria’s external reserves have plummeted in the last two weeks from $40.88 billion to $40.56 billion
• The decline is attributed to external debt repayments and interventions in the foreign exchange market
• Data shows that Nigeria’s debt servicing obligations have continued to soar, posing a risk to the country’s reserves

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

Nigeria’s external reserves grew in the past year but have declined sharply due to external debt servicing.

Data from the Central Bank of Nigeria (CBN) shows that Nigeria’s external reserves fell by $320 million, a 0.8 decline in two weeks.

Analysts identify the reason for the reserves' decline

As of January 13, 2025, the reserves stood at about $40.56 billion, relative to $40.88 billion on January 2, 2025.

Analysts blamed the decline on two key factors: international payments like debt servicing and the CBN's FX interventions.

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Nigeria’s external debt servicing expenditures stood at $3.6 billion in the first nine months of 2024, a 39.8% increase of $1.02 billion over the $2.6 billion spent in 2023.

The decline shows the ongoing hassles posed by Nigeria’s external debt servicing obligations and the desire to stabilise the exchange rate market.

Another reason for the depletion of the reserves is the apex bank’s intervention in the FX market, which aims to stabilise the local currency by supplying dollars to meet market demands.

Analysts lament the lack of FX intervention by CBN

Analysts say Nigeria’s reserves are essential to its economic stability, debt servicing, naira stability, and import payments.

Janet Ogochukwu, a senior banker, told Legit.ng that the CBN’s intervention in the FX market has been very weak, explaining the naira's woeful performance in recent weeks.

“There is a clamour for a robust intervention in the forex market to forestall further naira depreciation. When your local currency is left defenceless, what is the need to stash FX?

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Forex dealers, especially BDC operators, are lamenting the scarcity of forex to meet their growing demand, yet CBN is stashing it to gloat about growing reserves,” she said.

According to her, the drought in FX supply in the market is the reason for the naira’s unabated decline.

The Naira continues losses in all markets

Data from the FMDQ Exchange shows that the Nigerian currency maintained its week-long losing streak on Wednesday, January 15, 2025, falling by 0.09% in the Electronic Foreign Exchange Market System (EFEMS).

The naira opened trading negatively at N1,549 per dollar, the same rate it closed the previous day. 

At the end of trading on Wednesday, January 15, 2025, the naira depreciated by 0.09% to trade at N1,551.10 per dollar.

Forex buyers quoted the dollar at an intraday high of N1,554 per dollar and a low of N1,5,545.

Similarly, the naira tumbled in the parallel segment of the forex market, trading at N1,660 per dollar, down from N1,650.

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BDC operators report high dollar demands

Parallel market dealers said high demand has returned, causing the volatility.

Nigeria has experienced increasing debt servicing recently, which consumes a large part of the government’s budget.

The information shows that in the first six months of 2024, the country’s debt servicing payments hit N6.04 trillion, representing a 68% increase from N3.58 trillion recorded in the same period in 2023.

How naira compares to other currencies against USD

Legit.ng earlier reported that the Nigerian currency has remained relatively strong despite the dollar's surging strength to a two-year high against major currencies on Monday, January 13, 2025.

The naira has remained stable against the US greenback compared to other currencies.

The naira flatly ended the first week of trading in 2025 as pressure eased on the FX market.

Source: Legit.ng