Forex traders have attributed the recent decline in Nigeria’s external reserves to increased government spending and foreign exchange pressures linked to the election cycle.
They said one of the major factors driving this is the sustained intervention in the foreign exchange market by the Central Bank of Nigeria (CBN) as part of efforts to stabilise the naira.
They also mentioned capital flow volatility as some foreign portfolio investors continue to repatriate their funds or have become sensitive to global interest rates.
This follows data from the Central Bank of Nigeria (CBN), which shows that reserves dropped by about $850 million within three weeks.
The reserves fell from $50.03 billion on March 11, 2026, to $49.18 billion as of April 1, 2026, reversing a nine-month upward trend recorded since July 2025.
The development has raised concerns among market participants, especially as earlier projections had suggested sustained growth in reserves despite the general elections.
Analysts say the decline reflects multiple pressure points, including FX interventions, capital outflows, and external debt obligations.
What they are saying
Forex traders and market operators say the decline in reserves is driven by a combination of monetary interventions, capital flow volatility, and election-related fiscal pressures.
- “The Central Bank of Nigeria’s efforts to stabilise the naira and manage exchange rates with foreign exchange intervention have contributed to the decline. Payments on foreign debts have also put pressure on the reserves,” said Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON).
- “Capital flow volatility… can lead to sudden outflows, while election-year pressures from increased government spending and policy uncertainty can exacerbate reserve depletion,” he added.
- “A major factor is the sustained intervention by the Central Bank of Nigeria to stabilise the naira… each time the central bank injects dollars into the market, it draws down on reserves,” said forex trader Alhaji Basir Kanjiwa.
- “While oil prices have improved, actual inflows have not been strong enough to offset demand… there is also the issue of capital outflows as investors remain cautious,” he added.
Market participants say these combined pressures have weakened the pace of reserve accretion despite favourable oil price movements.
More insights
Experts note that Nigeria’s structural economic challenges continue to expose its external reserves to volatility, especially during periods of global and domestic uncertainty.
- Nigeria’s reliance on oil exports makes its reserves vulnerable to fluctuations in global crude oil prices and production challenges.
- High import dependence, particularly for petroleum products, industrial goods, and pharmaceuticals, continues to drive FX demand.
Analysts stress the need to boost non-oil exports and diversify sources of foreign exchange inflows.
They also recommend improving transparency in FX management and integrating Bureau De Change operators more effectively into the FX distribution framework.
Experts further note that restoring investor confidence, increasing oil production, and attracting foreign investment will be critical to stabilising reserves in the medium to long term.
No cause to worry
In a conversation with Nairametrics, the founder/Chief Executive Officer of the Centre for the Promotion of Public Enterprise (CPPE), Dr Muda Yusuf, hinted that there is no cause for alarm as the drop is not significant, noting that Nigeria is in a fairly comfortable position with its external reserves.
- Yusuf said, ‘’We are talking about a drop of less than two percent over the past few weeks. I think we are sitting generally in a fairly comfortable position as far as our reserves are concerned.”
He opined that some room for fluctuations should be allowed in the level of our reserves.
- He said, ‘’These fluctuations typically reflect some of the variables that impact the results. For instance, we have foreign obligations that we need to settle, like our debt obligations, for instance.
- ‘’When we have debt maturity to repay some of our external debts, of course, at that point, we expect to see some marginal decline. Because as we speak, our foreign reserve is still above $49 billion, from a peak of slightly $50 billion. So, it’s not something drastic enough to warrant any major worry that the reserve is declining.’’
What you should know
The CBN had, in its 2026 Macroeconomic Outlook for Nigeria, projected that Nigeria’s external reserves would rise to $51.04 billion in 2026, supported by stronger oil earnings, foreign exchange (FX) market reforms, and improved external inflows.
- The apex bank said the outlook reflects higher oil revenues, increased bond issuance, sustained diaspora remittances, forex market reforms, and expanded domestic refining capacity.
- The CBN added that reforms in the forex market would improve efficiency and transparency, narrow the premium between the Nigerian Foreign Exchange Market (NFEM) and BDC rates, and help sustain exchange rate stability.
- Meanwhile, the CBN Governor, Olayemi Cardoso, had, at the end of the 304th Monetary Policy Committee meeting in Abuja in February 2026, disclosed that Nigeria’s gross external reserves rose to $50.45 billion as of February 16, 2026, marking the highest level in 13 years, as the apex bank signalled stronger confidence in the country’s external position.
Cardoso said the gross reserves position now provides an import cover of 9.68 months for goods and services.
