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By Chinwendu Obienyi
Experts are advising the Central Bank of Nigeria (CBN) to maintain its interventions in the foreign exchange (FX) market following a $590 million increase in the country’s FX reserves.
Nigeria’s recent growth in FX reserves, fueled by its $2.2 billion Eurobond auction, underscores the country’s financial maneuvers in addressing fiscal and economic challenges.
According to data obtained from the CBN’s website, the reserves increased by $591.78 million from $40.292 billion on December 2, 2024, to $40.884 billion on January 3, 2025, marking a 1.47% month-on-month (m/m) rise.
When compared to the previous year, the country’s FX reserves have grown significantly. On January 3, 2024, the reserves stood at $33.042 billion and by January 3, 2025, this figure had surged to $40.884 billion, representing a substantial year-on-year increase of $7.84 billion, or 23.74%.
The rise is seen as a positive development in Nigeria’s efforts to stabilise its currency and address foreign exchange shortages.
It also reflects the critical role of external financing and fiscal management in bolstering the nation’s financial stability.
It will be recalled that the country had raised $2.2 billion through its Eurobond auction in December last year, marking a pivotal moment in the country’s ongoing efforts to address its growing fiscal deficit.
This auction, which saw the issuance of two bonds with varying tenors, follows the government’s return to the international capital markets for the first time since March 2022.
The funds raised will primarily be used to support Nigeria’s 2024 budget, which is under strain due to persistent revenue shortfalls and mounting public spending.
Hence, experts stated that the increase in reserves suggests improved inflows, possibly due to higher oil prices, external loans, or export earnings. However, they noted that challenges such as high demand for FX and speculative activities persist, threatening currency stability.
The Head, Research at FSL Securities, Victor Chiazor, said that the FX reserve growth signifies progress in Nigeria’s fiscal management.
“Although sustaining this trajectory will require continued diversification of revenue sources, effective management of oil earnings, and strategic interventions by the CBN. The government’s ability to leverage international capital markets and manage inflows efficiently will remain pivotal in achieving long-term economic stability”, Chiazor said.
Analysts at Cowry Research said, “We recommend the CBN continue deploying measures like targeted FX interventions, boosting non-oil exports, and curbing illicit capital flows to sustain this progress.
Additionally, long-term strategies such as diversifying the economy, increasing local production, and improving investor confidence are deemed crucial to ensuring sustained growth in FX reserves and overall economic stability”.
