Nigeria: External Reserves Dip as CBN Intensifies Naira Defense

Nigeria’s gross external reserves have witnessed a consistent decline in 2025, impacted by reduced US dollar inflows and sustained foreign exchange (FX) interventions by the Central Bank of Nigeria (CBN). Despite the $2.2 billion Eurobond inflows, the nation’s external reserves have remained under pressure, reflecting limited impact on the overall balance.

Recent data from the CBN shows that gross external reserves stood at $40.350 billion last week, down from $40.920 billion recorded in the first week of 2025. Analysts attribute this trend to dwindling inflows and moderate subscription levels at the initial Open Market Operations (OMO) auctions.

The CBN has actively intervened in the FX market, selling $300 million to authorized dealer banks last week to bolster liquidity in the official market. The interventions occurred over three sessions:

• Tuesday: $98.75 million sold at rates between N1,545 and N1,553 per US dollar.
• Wednesday: $47.35 million sold at rates between N1,545 and N1,560 per US dollar.
• Thursday: $154.8 million sold at rates between N1,545 and N1,555 per US dollar.

The total FX sales for the week amounted to $300.9 million, as noted by TrustBanc Financial Group Limited.

FX Market Trends
In December, Nigeria’s FX market demonstrated improved liquidity due to the introduction of the “BMATCH” trading platform and increased dollar inflows from exporters. The naira gained strength, driven by higher supply from foreign portfolio investors and reduced importer demand. Exchange rates ranged between N1,500 and N1,693, with the naira closing at N1,535.82—an 8.18% appreciation during the last month of 2024.

Crude Oil Production Challenges
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported a 1.4% decline in crude oil production (including condensates) to 1.67 million barrels per day (mb/d) in December, down from 1.69 mb/d in November. Production declines were notable at the Escravos (-4.0%) and Agbami (-19.9%) terminals, which overshadowed gains at Brass (+13.8%), Bonny (+3.1%), Tulja-Okwuibome (+1.4%), Odudu (+0.9%), and Forcados (+0.7%) terminals.

For 2024, Nigeria’s average crude oil production, including condensates, stood at 1.55 mb/d, falling short of the federal government’s 1.78 mb/d target by 0.23 mb/d. This marks a slight improvement from 1.47 mb/d recorded in 2023.

The consistent decline in external reserves underscores the challenges facing Nigeria’s economy, including persistent demand pressures in the FX market and volatility in crude oil production.