Nigeria’s FX Reserves Decline by $1.19 Billion as CBN Defends Naira and Services Debt

Nigeria’s foreign exchange (FX) reserves have dropped by $1.19 billion within three weeks as the Central Bank of Nigeria (CBN) works to stabilize the naira and meet debt obligations. According to CBN data, reserves fell from $40.92 billion on January 6, 2025, to $39.72 billion by the end of the month. Experts predict further declines, with Financial Derivatives Company forecasting a drop to $36.21 billion by the end of 2025. Naira Strengthens Amid Policy Changes Despite the decline in reserves, the naira has gained value, reaching an eight-month high of N1,447.78 per dollar in the official market. In the parallel market, it appreciated to N1,595, partly due to reduced dollar demand and CBN’s forex policies, including extending the deadline for Bureau de Change operators to access forex until May 2025. Debt Servicing and Eurobond Issuance Nigeria recently returned to the international debt market, issuing $2.2 billion in Eurobonds, which attracted strong investor interest with an oversubscription of $9 billion. However, rising debt servicing costs continue to pressure reserves, with Nigeria spending $3.6 billion in the first nine months of 2024—nearly 40% more than the previous year. CBN's Stabilization Efforts To support the naira and improve market liquidity, the CBN introduced a new FX Code based on six key principles, warning financial institutions of strict penalties for non-compliance. Additionally, it adjusted the Customs FX rate for cargo clearance, lowering it to N1,477.75 per dollar from N1,500. As Nigeria navigates economic challenges, ongoing CBN interventions will play a crucial role in managing forex reserves, exchange rates, and debt obligations.

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