Forex reserves drop $1.3bn  February 2025

Nigeria’s foreign exchange reserves experienced a $1.31 billion decline in February 2025, despite the naira’s strongest monthly rally of the year.

Data from the CBN reveals that reserves fell from $39.72 billion on January 31 to $38.42 billion by February 28, a 3.3 per cent decrease.

This drop, exceeding January’s $1.16 billion decline, underscores the persistent external pressures on Nigeria’s reserves.

The CBN’s aggressive interventions in the foreign exchange market, aimed at bridging liquidity gaps and supporting the naira, are cited as a primary factor contributing to this reserve depletion. Throughout February, reserves saw a consistent decline, with no single day of increase.

Key factors contributing to the decline in reserve  include Nigeria’s heavy import dependence, constraints on oil revenue due to production shortfalls and crude theft, and significant external debt obligations.

However, despite the reserve decline, the naira experienced a significant strengthening in February. The naira appreciated against the US dollar by 7.41 per cent, British pound 4.50 per cent and euro 6.34 per cent.

The official Nigerian Autonomous Foreign Exchange Market (NAFEM) rate also narrowed the gap with the parallel market, indicating progress towards a unified exchange rate.

Analysts warn that while CBN interventions have provided short-term stability, the continued depletion of reserves is unsustainable.

They recommend attracting foreign investment, enhancing non-oil exports, curbing crude oil theft, and implementing tighter fiscal policies to manage external debt.

The coming months will be crucial for Nigeria’s economic stability, as policymakers seek to balance currency stability with sustainable external liquidity management.