Nigeria’s foreign reserves fell by $2.55 billion in the first quarter of 2025, marking the sharpest Q1 decline in five years, according to data from the Central Bank of Nigeria (CBN).
The reserves dropped by 6.23% from $40.88 billion on January 2 to $38.33 billion on March 27, according to an analysis by TheCable Index.
In comparison, foreign reserves declined by $810.66 million (2.45%) in Q1 2024, $1.57 billion (4.24%) in Q1 2023, $971.35 million (2.39%) in Q1 2022, and $827.34 million (2.32%) in Q1 2021.
The decline in reserves coincided with a sharp drop in foreign portfolio investment (FPI). According to data from the Nigerian Exchange Limited (NGX), FPI fell by 30.3% from January to February 2025.
In January, Nigeria recorded $17.35 million in foreign direct investments through equities, but the figure dropped to $12.09 million in February. During the same period, foreign outflows outstripped inflows, with $31.01 million recorded in January and $16.48 million in February. Data for March is yet to be released.
Charles Abuede, research lead at Cowry Asset Management Limited, attributed the reserve depletion to weak foreign exchange (FX) inflows, low petrodollar earnings, and the CBN’s efforts to stabilize the naira through weekly FX sales to bureau de change (BDC) operators.
“The depletion of Nigeria’s foreign reserves in Q1 2025 clearly indicates a lack of FX inflows into the economy,” Abuede said. “Crude oil prices fluctuating between $65 and $70 per barrel have contributed to minimal petrodollar earnings, while the CBN’s $25,000 weekly FX sales to BDC operators have drained reserves.”
Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), also pointed to the CBN’s intervention in the FX market as a contributing factor. “If we are defending the naira without matching inflows, reserves will naturally decline,” Yusuf said. “This depletion could also trigger speculative pressure in the FX market, leading to further depreciation of the currency.”
Despite the decline in reserves, the exchange rate in the official FX market remained relatively stable, with the naira trading at N1,534 per dollar on January 3 and N1,539 per dollar on March 26. In the parallel market, however, the naira appreciated from N1,650 per dollar to N1,560 per dollar, a 5.45% gain.
However, analysts warn that the continued decline in reserves could erode these gains. “This decline will exert further pressure on the naira as CBN interventions remain unsustainable without sufficient FX inflows,” Abuede said.
To address the dwindling reserves, Abuede stressed the need for Nigeria to meet its 2025 crude oil production target of 2.06 million barrels per day (mbpd) and diversify its FX sources beyond oil. “Attracting foreign investments and boosting remittance inflows are crucial to stabilizing the currency and strengthening external reserves,” he said.
Yusuf called for a continuation of CBN’s market-driven FX policies to encourage autonomous inflows. “The FX market should remain as liberal as possible to ensure seamless capital inflows,” he said.
He also emphasized the need to ramp up oil production and support investments in gas exports, while encouraging Nigerians in the diaspora to invest in local financial instruments.
“The current depletion trend raises concerns, but with the right mix of fiscal and monetary policies, Nigeria can stabilize its external reserves and currency in the coming months,” Yusuf added.
Source: agcnewsnet.com