Nigeria’s foreign exchange (FX) reserves declined significantly by $1.16 billion in January 2025, wiping out the $592.58 million gain recorded in December 2024.
The latest figures from the Central Bank of Nigeria (CBN) show that reserves fell from $40.88 billion at the end of December to $39.72 billion as of January 31, 2025.
This marks the sharpest monthly decline since April 2024 and raises concerns about the country’s external liquidity position.
What does the data say
- CBN reviewed by Nairametrics indicates a steady decline throughout the month, with reserves dropping from $40.88 billion on January 2 to $40.75 billion by January 10.
- The decline accelerated in the latter half of the month, falling below the $40 billion threshold on January 22 and closing at $39.72 billion by month-end.
- A $1.16 billion drop represents a 2.84% decline in just one month, raising concerns about the country’s ability to sustain external obligations, including debt repayments and import financing.
- The last time Nigeria experienced such a sharp drop in reserves was in April 2024, when reserves fell significantly.
In April 2024, Nairametrics reported that Nigeria’s foreign exchange (FX) reserves have witnessed a significant downturn, plunging by approximately $2.16 billion in 29 days, amidst the Central Bank of Nigeria’s (CBN) robust efforts to stabilize the naira.
Current figures from the CBN, as of April 15, 2024, reveal that the FX reserves are now positioned at $32.29 billion, a stark decline from $34.45 billion recorded on March 18, 2024.
The CBN governor, Yemi Cardoso, blamed the previous decline in April 2024 on debt repayments and other standard financial obligations, rather than efforts to defend the naira.
What you should know
The January decline follows the CBN’s increased dollar sales to Bureau De Change (BDC) operators as part of efforts to stabilize the naira amid ongoing currency volatility.
- Despite concerns, the CBN has maintained that its strategy aims to restore confidence in the FX market by ensuring liquidity at the retail end.
- The CBN resumed dollar sales to BDCs in December, injecting foreign exchange into the retail segment to curb speculative attacks on the naira.
- In a circular, the CBN granted BDC operators temporary permission to purchase up to $25,000 weekly in FX from the Nigerian Foreign Exchange Market.
- Under the directive, BDCs may purchase FX from a single Authorized Dealer of their choice, provided they fully fund their accounts before accessing the market.
- The transactions will occur at the prevailing NFEM rate, and BDCs are required to adhere to a maximum 1% spread when pricing FX for retail end-users.
The arrangement was to be in effect from December 19, 2024, to January 30, 2025.
However, the CBN has extended the deadline for BDC operators to access the NFEM for weekly FX purchases. In a circular signed by Dr. W.J. Kanya, the Acting Director of the Trade & Exchange Department at the CBN on Monday, the apex bank announced that the previous deadline of January 31, 2025, has now been extended to May 30, 2025.
This intervention has helped ease pressures in the parallel market, with rates gradually converging with the official exchange rate.
Nairametrics earlier reported that the naira closed January 2025 at N1,475/$1 at the NFEM, marking its strongest performance since June 2024.
The Nigerian currency was officially exchanged for N1,473 to a dollar on June 11, 2024, the strongest until January 31, 2025.
This represents a significant gain from its closing rate of N1,535/$1 on December 31, 2024, indicating a N60 gain or a 3.91% increase month-on-month.
