Nigeria’s reserve asset down by $1.19 billion after a $40.9 billion high

The country’s central bank revealed that Nigeria’s gross external reserves had hit $40.877 billion at the end of 2024, which would then slightly increase to $40.920 billion in January 2025.

Conversely, the external reserve figures declined to $39.723 billion as of January 31st, a Business Day report showed.

The Financial Derivatives Company (FDC), led by Bismarck Rewane, anticipates the country’s gross foreign reserves to fall by 11.47% in 2025 to $36.21 billion and then increase to $37.65 billion in 2026, from a peak of $40.9 billion in 2024.

According to FDC experts, the dollar/naira exchange rate will average N1,586 in 2025 and N,1575 in 2026, compared to an average of N1,615 in 2024.

The currency’s strongest performance in almost a year came in at 1474.78/$ in the official foreign exchange (FX) market, as dollar demand eased due to the government’s fiscal and monetary policies.

The country had issued $2.20 billion in Eurobonds, hence getting back into the global debt market after a more than two-year break.

Two tranches of the financing were issued: $700 million with a 2031 maturity and $1.50 billion with a 2034 maturity.

The bonds proved popular with significant investor demand, resulting in an order book of more than $9 billion, as the Nigerian instruments’ yields were more appealing than those of recent SSA issuances.

While the reserves decrease correlated with two primary factors: international debt service requirements and the CBN’s foreign exchange (FX) operations, an informed source stated that as supply matches demand, the reserves are being diverted elsewhere.

“Reserves are used for many reasons and not just by CBN. When we repay external loans, or pay coupons on Eurobonds, or spend in USD based on budget, where do you think the money comes from?

I don’t monitor reserves but I know that there has been nothing done by CBN that remotely resembles defending the naira. The naira is appreciating so there is no need to defend it and the volume of CBN involvement in the markets is sub 10 percent,” the source said.

“Some observers argued that Nigeria might have been better off waiting until 2025 when moderating U.S. inflation could lead to lower interest rates from the Fed. Looking ahead, Nigeria faces some notable debt obligations.

Aside from 2026, the country has Eurobond maturities averaging $1.33 billion annually over the next decade. Including coupon payments, total annual debt servicing costs could average $2.24 billion,” according to CardinalStone analysts in their 2025 economic outlook titled ‘Pressure to the Plateau.’