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By Uche Usim
Recent monetary policy reforms of the Central Bank of Nigeria (CBN) are slowly but steadily pushing Nigeria’s economy from an era of volatility to stability.
According to the apex bank, Nigeria’s key economic indicators are getting stronger, especially with the sharp rise in foreign reserves to $46.7 billion, enough to pay for more than 10 months of the nation’s imports.
The milestone, analysts note, is the highest reserve level since 2018 and it is bolstering investor confidence, stabilising the foreign exchange market and shaping a more predictable economic environment for households, businesses and foreign investors.
Speaking at the 20th Anniversary of the Monetary Policy Department (MPD) in Abuja recently, CBN Governor, Olayemi Cardoso, represented by the Deputy Governor in charge of Economic Policy, Dr. Muhammad Abdullahi, declared that the reserve position marks “a major milestone in the Bank’s reform programme.”
He added: “Foreign reserves have risen to $46.7 billion, supported by sustained inflows and renewed investor participation across various asset classes.”
The apex bank boss attributes the surge to a combination of stronger portfolio inflows, a rebound in oil receipts, policy-driven improvements in FX market transparency and the restoration of investor confidence.
According to Cardoso, the naira has also continued to “firm up,” with the spread between the official market and the Bureau-de-Change (BDC) segments narrowing to below two per cent, an outcome that many financial analysts had considered unthinkable only a year ago.
Inflation cools to lowest level in three years
The once-escalating inflation curve is now bending downward. Headline inflation slowed to 16.05 per cent in October 2025, from 34.6 per cent in November 2024, marking the lowest inflation rate in three years and the seventh consecutive month of disinflation.
Cardoso described this progress as “an encouraging sign that price stability is returning.”
He noted that core inflation is also softening, reflecting the reduced exchange-rate pass-through stable energy prices, and improved supply conditions.
The National Bureau of Statistics (NBS), in its October 2025 Consumer Price Index (CPI) Report, echoed this trend, stating: “In October 2025, the Headline inflation rate eased to 16.05 per cent relative to the September 2025 headline inflation rate of 18.02 per cent.”
On a year-on-year basis, the NBS recorded a 17.82 per cent decline compared to October 2024, an exceptional reversal for an economy that just a year earlier grappled with surging prices triggered by FX volatility, fuel subsidy removal, and global commodity disruptions.
While month-on-month inflation rose slightly from 0.72 per cent in September to 0.93 per cent in October, the NBS explained that such movements reflect seasonal price pressures rather than a reversal of the broader disinflation trend.
Stronger FX positioning and renewed investor optimism
Already, the International Monetary Fund has taken note of these marked improvements, projecting a 3.9 per cent GDP growth rate for Nigeria in 2025. This outlook is rooted in the belief that foreign reserves will remain robust, FX liquidity more predictable and monetary reforms sustained.
Analysts expect FX liquidity to strengthen further as investor sentiment brightens and both foreign and domestic dollar sources pick up momentum. Many point to consistent market reforms, particularly the willing buyer, willing seller framework, streamlined IMTO operations, and restored CBN credibility, as drivers of stability.
According to analysts: “We expect FX liquidity to remain robust, supported by reduced global pressures and stronger market confidence, which continues to attract inflows from foreign portfolio investors (FPIs). Additionally, a stronger net FX reserve position enhances the CBN’s capacity to intervene when necessary.”
This confidence has already attracted new inflows from diaspora remittances, foreign airlines, institutional investors, and manufacturers, groups that had previously struggled to access dollars or repatriate funds.
Charlie Bird, Director of Trading at Verto, described Nigeria as the new “darling of foreign investors,” saying: “Improved dollar liquidity in the economy due to positive CBN reforms has provided much-needed balance, enabling investors and airlines to repatriate funds with ease.”
CBN activates multiple FX sources
One of the most significant pillars of the naira’s recent strength is the CBN’s aggressive diversification of foreign exchange sources. The Bank has expanded licences for new International Money Transfer Operators (IMTOs), strengthened diaspora remittance channels, and introduced incentives that make the FX market more attractive to both buyers and sellers.
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Cardoso has repeatedly emphasised that diaspora remittances, estimated at $23 billion annually, represent a reliable and sustainable FX pipeline, and the CBN’s goal is to double formal remittance inflows within a year.
The Bank has also worked to streamline naira liquidity access for FX market participants, simplify documentation procedures, and reduce transaction turnaround time, measures that have helped reduce arbitrage opportunities and improve transaction transparency.
Reserves rise despite heavy expenditure pressures
Remarkably, the rise in foreign reserves occurred despite intensive external debt servicing, market interventions to stabilise the naira, and lingering oil production constraints. Analysts interpret this outcome as evidence of improved market confidence and stronger non-oil inflows, with Nigeria now receiving more FX from remittances, portfolio investments, and diversification-linked revenues.
As the naira strengthens across markets, import costs, traditionally one of the most inflationary components of Nigeria’s economy, are expected to drop significantly. Import duties, VAT, and other levies are calculated using the CIF (Cost, Insurance and Freight) value, which is highly sensitive to exchange-rate movements. A stronger naira directly translates to a reduced CIF base and ultimately lower prices.
Nigeria’s total imports in 2024 stood at $40.97 billion, according to UN COMTRADE data. China, Belgium, and India remain the country’s largest suppliers.
In Q1 2025 alone, Nigeria imported N1.67 trillion worth of food and beverages, a five per cent rise year-on-year. While this reflects consumption patterns and supply gaps, analysts note that naira appreciation has helped cushion the impact of global price shocks, particularly the spike in fuel import prices triggered by Middle Eastern tensions.
Cordros Securities analysts stated: “Barring any unexpected shocks, we anticipate that the naira will remain stable in the near term. The appreciation helped cushion the impact of the spike in imported fuel prices, and FX liquidity is expected to remain strong.”
Although Nigeria is inching closer to fuel self-sufficiency, especially with domestic refineries reviving operations, it still relies partly on fuel imports, making FX stability crucial.
Trade tensions ease globally
Global trade tensions have also softened, especially following the U.S. President’s decision to pause the implementation of reciprocal tariff hikes. The negotiation window, extended to August 1, provides breathing room for global supply chains and import-dependent economies like Nigeria.
Stakeholders call for translating growth to welfare
Dr. Baba Musa, Director-General of the West African Institute for Financial and Economic Management (WAIFEM) and President of the Nigerian Economic Society, emphasised that growth statistics must translate to real-life improvements for Nigerians.
In his report titled “Nigeria’s Economic Outlook at a Turning Point,” Musa wrote: “Gains in growth, inflation moderation, and investment confidence mark important progress, but the work is far from complete. To sustain the recovery, Nigeria must maintain macroeconomic stability, deepen structural reforms, and ensure that growth translates into tangible improvements for citizens.”
Musa highlighted that Nigeria remains at a crucial inflection point, encouraging yet fragile. He cited infrastructural deficits, unemployment, and structural imbalances as areas requiring urgent attention.
He added: “The real test lies not only in achieving stability but in ensuring that it translates into decent jobs, rising incomes, improved productivity, and broader social welfare.”
The IMF projects Nigeria’s GDP to grow from 3.5 per cent in 2024 to 3.9 per cent in 2025, and further to 4.2 per cent in 2026, a trajectory driven by improved oil production, FX market reforms, and greater investor confidence.
Musa concluded that Nigeria has demonstrated “remarkable determination” despite global uncertainties, stressing that collaboration between government, private sector, development partners, and civil society will be crucial.
Nigeria at a turning point but sustained discipline required
Nigeria’s rising foreign reserves, narrowing FX spreads, moderating inflation, and strengthening investor sentiment collectively point to an economy undergoing strategic recalibration. For businesses, these trends mean greater planning certainty, improved access to FX, and more predictable input costs. For households, they offer relief from inflationary pressures that eroded purchasing power over the past two years.
Yet analysts insist that the sustainability of these gains will depend on: Maintaining FX market reforms; boosting domestic production to reduce import dependence; expanding non-oil exports; strengthening fiscal discipline and prioritising job-creating growth sectors.
If these conditions are met, analysts say Nigeria could transition from short-term recovery to long-term resilience, ultimately reshaping its economic landscape.
