Good News for Naira As Nigeria’s Foreign Reserves Rise to Highest Level in 3 Years

• Nigerian foreign reserves have been on the rise in recent months, and it is now at its highest level in 3 years
• Data from the CBN showed that Nigeria's FX reserves in December alone increased by $524.07 million
• The increase in the nation’s reserves has helped the naira bounce back in the foreign exchange markets

Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.

The Central Bank of Nigeria has revealed that Nigeria’s external reserves increased to $40.81 billion as of Friday, December 12, 2024.

This latest figure represents a $524.07 million increase in just 20 days compared to the $40.29 billion the reserves stood at at the beginning of December 2024.

The last time Nigeria's external reserves rose to the current level was December 9, 2021.

Breakdown of reserves’ growth

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CBN data showed Nigeria's reserves have been over $40 billion since November 9, 2024.

Here is a monthly balance of Nigeria's reserves in 2024

• January: $33.35bn
• February: $33.72bn
• March: $34.26bn
• April: $32.25bn
• May: $32.69bn
• June: $34.19bn
• July: $36.80bn
• August: $36.83bn
• September: $36.31bn
• October: $39.79bn
• November: $40.23bn
• December(20th): $40.82bn

Sources of inflows

Nigeria's foreign reserves have been rising steadily since President Bola Tinubu's administration ceased paying fuel subsidy, which led to an increase in fuel prices.

The growth in reserves during the month reflects a significant improvement in foreign exchange inflows, likely driven by higher oil export revenues, external borrowing, and increased investor confidence in Nigeria's financial markets.

Why is external reserves growth important?

Foreign reserves growth is important because it acts as a safety net for a country's economy, allowing it to stand against currency fluctuations, sudden capital outflows, or economic crises by providing readily available funds to intervene in the foreign exchange market and stabilise the domestic currency.

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CBN data shows foreign exchange inflow in Nigeria in 2024, naira affected

Some of the reasons FX reserves growth is important include:

• The CBN use it to manage exchange rate stability
• It is also used to pay external debt
• It is also used to support importation like the RDAs

Naira exchange rate rises

Earlier, Legit.ng reported that the Nigerian naira began the week positively against the US dollar, gaining 0.14% in the official Electronic Foreign Exchange Market System (EFEMS).

The naira appreciated by 14 basis points, closing at N1,539.55 per dollar on Monday, December 23, 2024, an improvement from the previous day’s value.

The FX market displayed stability and improved liquidity. Analysts say FX transactions were finalised at a high of N1,545 and a low of N1,532 per dollar.

Proofreading by James, Ojo Adakole, journalist and copy editor at Legit.ng.

Source: Legit.ng