Big Boost for Naira as Nigeria’s Foreign Reserves Rise to 4-Year High
- There has been a significant increase in Nigeria’s foreign exchange reserves over the last month, CBN data shows
- The increase in reserves has been driven by higher oil revenues, strategic management, and a recent Eurobond loan
- The rise in Nigeria's foreign reserves is a major boost for the naira, providing the CBN with more firepower to meet FX demands
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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 foreign reserves have increased to $40.92 billion as of Monday, January 6, 2025
The latest reserves indicated a $606.23 million increase in one month compared to the $40.31 billion recorded as of December 6, 2024.
Source: Getty Images
The January 6 reserves balance was also the highest since December 9, 2021, when it stood at $40.93 billion.
How do FX reserves rise?
Punch reports that the successful Eurobond issuance and the strategic management of foreign exchange inflows have also helped improve the reserves.
Moreover, the increase in global oil prices has positively impacted foreign reserves, with oil currently trading at $77.79 per barrel.
Bonny Light, Nigeria's oil blend, is among the highest-priced at $78.62 per barrel as of January 8, 2024.
Rising oil prices are expected to increase the foreign exchange earnings of oil-producing countries like Nigeria.
This, in turn, leads to the accumulation of foreign reserves, an increase in the supply of foreign exchange, and a moderation of demand pressure in the foreign exchange market.
Why is external reserves growth vital?
Higher reserves improve Nigeria’s ability to meet external payment obligations, such as debt servicing and import financing, providing a buffer against economic shocks.
FX reserves also helped the CBN provide immediate funds to intervene in the foreign exchange market and stabilise the domestic currency.
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: $40.827bn
Naira improves against US dollar
The rise in reserves has been evident in the CBN's efforts to stabilise the FX market following the introduction of the Electronic Foreign Exchange Matching System (EFEMS), which has provided transparency and combated price manipulation in the FX market.
Since December 2, following the launch, the naira has gained N125 against the US dollar as the CBN now has sufficient funds to intervene in the market.
At the EFEMS launch, the dollar was quoted at N1,660 in the official market.
The latest exchange rate shows that the naira traded at N1,536 against the dollar on Monday, January 6.
Similarly, the dollar has dropped in the black market, falling from a high of N1,750 to the current rate of N1,655.
CBN reveals how forex inflows through IMTOs rose in 2024
Ealier, Legit.ng reported that the CBN reported a massive rise in IMTO remittance inflows in the first nine months of 2024
The apex bank disclosed that remittances via international money transfer operators (IMTOs) rose by 63.7% in 2024.
The CBN data revealed that total inflows into the country via IMTOs amounted to $3.83 billion in 2024 from $2.33 billion in 2023.
Proofreading by James, Ojo Adakole, journalist and copy editor at Legit.ng.
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