Market News

Despite nearly $1.4 billion drop in Nigeria’s external reserves by the end of February 2025, analysts have predicted that the year’s end will be bountiful. 

Analysts at CNN Quest Merchant Bank stated this in a note on Tuesday.

According to the most recent data on external reserves published by the CBN, Nigeria’s gross official reserves declined by nearly $1.4 billion to $38.4 billion as of the end of February 2025. 

This marks the second consecutive monthly decline after the reserves peaked at $40.9 billion in Dec ’24, their highest level in 37 months. 

Cumulatively, the gross reserves have fallen by around $2.5 billion since December 2024, due to a combination of the CBN’s active participation in the foreign exchange (FX) market and the repayment of external debt service obligations.

The decline in gross reserves is understandable, considering that USD debt service obligations usually peak in the first quarter of the year.

Despite the m/m decline in gross official reserves, the CBN’s FX policies have enhanced transparency in the FX market and boosted foreign capital inflows, leading to relative stability of the naira.

The total reserves as at the end of Feb covered 9.6 months of merchandise imports based on the balance of payments for the 12 months to September 2024 and 8.0 months when we add imported services.

Conversely, the external reserves position of South Africa and Egypt, the other two markets that we track on the continent, improved m/m.

South Africa’s international liquidity position, comprising its gross reserves, gold reserves, and forward positions—netted off for some less liquid portions of the reserves—increased by USD404m m/m to $61.7 billion in February 2025.

The m/m rise was primarily driven by higher gold prices, foreign currency valuation adjustments, and asset price fluctuations.

Egypt’s external reserves increased by approximately $100 million to $47.4 billion, driven by significant foreign investments from the United Arab Emirates (UAE) for the Ras El Hekma project and remittances from Egyptians abroad.

Looking ahead, analysts said, “we anticipate a reversal of the decline in Nigeria’s gross official reserves after Q1 and forecast a year-end 2025 gross external reserve position of $43.0 billion.