Market News

Nigeria’s gross external reserves rose to $46.11 billion as of January 28, 2026, marking the highest level in eight years, with capacity to cover 14 months imports for the country.

The reserves position represents an 18.6 per cent increase from $38.88 billion in January 2025. The improvement is attributed to increased oil exports, diaspora inflows, and foreign portfolio investments.

Managing Director, Financial Derivatives Company Limited, Bismark Rewane, said stronger external reserves have helped to ease pressure on the naira, which appreciated by 0.65 per cent to N1,385/$.

“This is the strongest level of the naira in the last two years when it was N1,329.65/$ in May, 2024. Improved reserve buffers have also lifted import cover to 14 months, helping reduce exchange-rate pass-through to inflation, lower input-cost volatility for small and medium-sized businesses, and support household purchasing power and consumer confidence ahead of the pre-election year,” he said.

Other factors driving reserves build up include improved FX inflows, higher oil receipts, increased remittances through official channels and renewed interest from foreign portfolio investors following FX market reforms instituted by the Olayemi Cardoso-led Central Bank of Nigeria (CBN).

Overall, strong reserves position will continue to bolster exchange rate and promote financial sector stability.

Other industry data shows that Nigeria’s external reserves were last at this level on August 27, 2018, when it stood at $45.9 billion.

The reserve build-up signals stronger buffers for import cover and currency stability, reflecting steady inflows and improved foreign exchange management since the forex reforms began, as the country prepares for a general election.

The CBN data also suggests a notable turnaround from the volatility experienced during the early phase of the new forex regime, with the reserves closing at about $45.5 billion in 2025, having opened the year at roughly $40.8 billion.

Analysts have expressed optimism that the steady growth of Nigeria’s external reserve for several months will be sustained this year.

They said that the various reforms by the government have brought stability and confidence, thereby causing improvement in the country’s external reserves.

They, however, noted that while the reserves can be sustained in the short term, sustaining the momentum throughout the election year will depend on discipline on the part of the government.

President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the  naira has remained stable across market for several months, ending years of volatility in the market.

Additionally, Rewane, estimated the fair value of the naira at about N1,257 to the US dollar.

Rewane posits that the local currency is undervalued by approximately 11 per cent when assessed using the purchasing power parity (PPP) model.

He made the submission during his keynote address at the 2026 Economic Outlook organised by the Association of Corporate Treasurers of Nigeria (ACTN), where he anchored the session and offered a detailed analysis of the structural and cyclical factors influencing Nigeria’s exchange-rate movements.

He noted that currencies typically converge towards their PPP-implied values over a five-year horizon.

According to him, the appropriate exchange rate based on current PPP estimates stands at N1,256.79 to the dollar, reinforcing the view that the naira remains below its fair valuation level.

Chief Executive Officer, Centre for the Promotion of Public Enterprise (CPPE), Dr Muda Yusuf, hinted at a positive outlook for Nigeria’s external reserves as he does not see anything derailing the forex and fiscal reforms that have brought about stability and improvement in external reserves.

Yusuf said: ‘’Well, the outlook for me is positive because I don’t see anything derailing these reforms [forex reform, fuel subsidy etc]. It is these reforms that have brought about stability. And it’s this stability that has inspired confidence. It is the confidence that has allowed the improvement in the reserves. The reserves are not so much coming from oil, though. I don’t have the full breakdown. But my sense is that the reserves are coming from largely outside the oil – FDI, portfolio, diaspora flows, non-oil exports etc. Quite a lot is happening outside traditional sources of forex.

 ‘’So, those things are anchored on reforms. For as long as that is happening and I don’t see that changing, even with the so-called election year or whatever, I don’t see anything changing that in any drastic way.’’

Other analysts said the growth in the external reserves can only be sustained in 2026 if the Central Bank of Nigeria (CBN) avoids excessive FX intervention, fiscal authorities are restrained from spending pressures and the FX reforms are not reversed.

They said: ‘’Historically, election cycles in Nigeria tend to introduce policy uncertainty, FX demand pressure, and capital flow reversals. So, while reserves can be sustained in the short term, maintaining this momentum throughout an election year will depend on discipline.

CBN had, in its 2026 Macroeconomic Outlook for Nigeria, projected that Nigeria’s external reserve would rise to $51.04 billion in 2026, supported by stronger oil earnings, foreign exchange (FX) market reforms, and improved external inflows.

The apex bank said the outlook reflects higher oil revenues, increased bond issuance, sustained diaspora remittances, FX market reforms, and expanded domestic refining capacity.

CBN stated, “The external reserves is projected at US$51.04 billion in 2026, compared with US$45.01 billion in 2025. The external reserves is expected to be boosted by reduced pressure in the FX market based on the anticipated rise in oil earnings, sovereign bond issuance, and diaspora remittance inflow.’’

The apex bank linked the positive external reserve outlook to expanded domestic refining, notably the Dangote Refinery’s planned capacity increase to 700,000 bpd in 2025 and a longer-term target of 1.4 million bpd.

According to the CBN, increased local refining would reduce Nigeria’s dependence on imported petroleum products, lowering demand for foreign exchange and easing pressure on external reserves.