Analysts have projected that Nigeria’s external reserves would rise to about $45bn by the end of the year, thus strengthening the ability of the Central Bank of Nigeria to provide a buffer for the foreign exchange market and general economy.
This projection followed the rise of the exchange reserves to $41bn last Tuesday, the highest level recorded in 44 months, according to CBN data. The appreciation in the reserves signalled a significant recovery following depletion driven by external debt repayments.
The reserves have experienced a sustained appreciation in August, increasing by $1.56bn from $39.54bn on August 1 to $41.11bn on August 22, representing a 3.95 per cent increase in less than a month.
According to the analysts at Cowry Assets Management in their weekly market report, the momentum of reserve growth appears likely to continue, supported by steady offshore inflows and potential external borrowings planned by the government.
“The combination of these factors should keep the reserves on an upward trajectory in the coming months. Our projection suggests that Nigeria’s reserves could rise to about $45bn by the end of 2025, provided global risk conditions remain broadly supportive and offshore flows are not significantly disrupted. With the reserves position strengthening, the CBN will have greater flexibility to sustain its interventionist approach in the FX market. This, in turn, should help to maintain relative stability in the naira across both official and parallel markets,” the experts said.
Sounding a word of caution, though, the analysts said that the outlook was not without risks, “As shifts in global financial markets or a sudden reversal in portfolio inflows could challenge the resilience of the current momentum. Nevertheless, the recent build-up represents a significant achievement and a positive signal for Nigeria’s external stability at a time when many emerging markets continue to grapple with external vulnerabilities.”
For the analysts at Meristem Securities, the outlook was also positive, as they projected that the reserves may well stay above the $40bn threshold if current trends persist.
They said, “The stronger reserve position is expected to enhance the CBN’s capacity to stabilise the naira, bolster investor confidence, and support external balance. With oil receipts improving, portfolio inflows strengthening, and non-oil exports gaining traction, the momentum could be sustained in the near term. If current trends persist, reserves are likely to remain above the $40bn threshold, providing a solid buffer for exchange rate management and broader macroeconomic stability.”
Market watchers have maintained that CBN’s intervention in the FX market was key to keeping the naira stable.
Highlighting the role of the CBN, experts at AIICO Capital in the past week noted that the absence of the CBN’s intervention during the early part of the week constrained liquidity, “though later interventions of about $50m alongside inflows from an oiler helped ease pressure and narrow spreads. By week’s close, trades stabilised within $/N1534.50–1536.00, with the naira depreciating 16 bps w/w to $/N1535.04.”
At the close of trading on Monday, the naira closed at 1,536.42/$, about 0.09 per cent weaker than the previous day’s trade close.
