Nigeria’s foreign exchange reserves have declined by $1.38 billion since January, reaching $39.440 billion as of February 5, 2025. This marks the lowest level in five months, returning to the same figure recorded on October 25, 2024, according to data from the Central Bank of Nigeria (CBN).
At the close of 2024, the country’s FX reserves stood at $40.877 billion. The drop comes despite Nigeria securing $3.8 billion in external and domestic borrowings last year, including $900 million in domestic bonds, $2.2 billion from Eurobonds, and $750 million from a $2.2 billion World Bank loan.
While Nigeria’s gross foreign currency assets have been declining, the local currency has shown signs of appreciation in the parallel market.
Debt Obligations and Forex Market Trends
A report by CardinalStone forecasts that Nigeria faces annual Eurobond maturities of approximately $1.33 billion over the next ten years. In addition, the country is expected to incur an average annual debt servicing cost of $2.24 billion, including coupon payments.
Despite these obligations, the naira recorded an appreciation in the parallel foreign exchange market on Thursday, February 6, 2025. The currency strengthened by N15 per dollar, with the exchange rate improving to N1,570 from the N1,585 quoted previously.
Traders in the informal FX market attributed the improvement to increased availability of dollars, allowing dealers to meet rising demand.
CBN Introduces New Forex Directives for BDCs
In response to currency volatility, the CBN recently introduced new regulations allowing authorised dealer banks to sell FX to Bureau de Change (BDC) operators, with a weekly transaction cap of $25,000.
According to the CBN, this measure is intended to enhance transparency, strengthen forex tracking, and mitigate money laundering risks in the BDC sector. The directive also requires that BDCs sell FX to end-users at a rate not exceeding one per cent above their buying price from banks.
Fluctuations in the Official Market
While the naira has gained ground in the parallel market, it has faced some setbacks in the official market. After experiencing sustained appreciation in the final week of January, the currency opened February on a weaker note.
The CBN had previously implemented a series of policy measures to stabilise the exchange rate, including the introduction of an FX Code to improve liquidity and transparency. Experts have credited these reforms for the naira’s recent resilience, though ongoing market fluctuations suggest that broader structural challenges remain.