Nigeria’s reserves poised for growth, aiding Naira stability
Story from Martha Gwary
Nigeria’s external reserves could rise to around $45 billion by the end of the year, according to analysts, a move that would significantly boost the Central Bank of Nigeria’s (CBN) ability to support the foreign exchange market and wider economy.
This positive outlook follows the reserves reaching $41 billion last Tuesday, a 44-month high that signals a major recovery after a period of depletion due to external debt repayments.
Throughout August, the reserves have seen a sustained increase, climbing by $1.56 billion in less than a month to reach $41.11 billion by August 22.
Account to analysts at Cowry Assets Management believe this growth will continue, supported by steady inflows of foreign investment and potential government borrowing from abroad.
“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.
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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 firm stated in its weekly market report.
They did, however, offer a word of caution, noting that the outlook “is not without risks, as shifts in global financial markets or a sudden reversal in portfolio inflows could challenge the resilience of the current momentum.” Despite this, they hailed the recent build-up as a “significant achievement and a positive signal for Nigeria’s external stability.”
Analysts at Meristem Securities also hold a positive view, projecting that reserves could remain above the $40 billion threshold if current trends persist.
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“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,” they said.
Market observers agree that the CBN’s intervention is crucial for maintaining the naira’s stability.
Experts at AIICO Capital highlighted the bank’s role last week, noting that a lack of intervention early in the week limited 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 $/N1535.04,” they reported.
By the close of trading on Monday, the naira had settled at 1,536.42/$, a slight weakening of 0.09 per cent from the previous day’s close.
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