Market News

The naira appreciated slightly against the dollar on Thursday at the official foreign exchange (FX) market, as Nigeria’s external reserves rose to a four-year high of $41.00 billion, according to data from the Central Bank of Nigeria (CBN).

External reserves, which provide the CBN with the capacity to defend the naira, climbed to $41.00 billion as of August 19, 2025, an increase of $4.53 billion or 12.42 percent year-on-year compared to $36.47 billion recorded on the same date in 2024. The last time reserves were at this level was on March 12, 2021, when they stood at $41.08 billion.

At the close of trading on Thursday, the naira strengthened marginally by N0.95, with the dollar quoted at N1,535.78 compared to N1,536.73 on Wednesday at the Nigerian Foreign Exchange Market (NFEM), CBN data showed.

In the parallel market, the naira remained stable at N1,545 per dollar. GTBank’s FX rate for international transactions also held steady at N1,543 on Thursday, after dropping from N1,545 earlier in the week.

A report by United Capital noted that the naira appreciated by 1.4 percent in July, moving from N1,552/$1 in June to N1,530/$1. The gap between the official and parallel market rates stayed narrow. External reserves also grew consistently throughout July, closing at $39.4 billion (based on a 30-day moving average). “The actual reserve level is now above $40 billion, covering over 9.5 months of import needs,” analysts at United Capital said.

The growth has been attributed to a combination of FX market reforms by the CBN, improved diaspora remittances, higher foreign portfolio inflows, increased crude oil production, and reduced crude oil losses, all of which have supported a more stable exchange rate and a gradual appreciation of the naira.

Analysts at FBNQuest highlighted that the notable boost in reserves gives the CBN greater flexibility to continue its intervention strategy, aiding market liquidity and exchange rate stability.

As of July 2025, Nigeria’s gross reserves could cover 11.9 months of merchandise imports and 8.2 months when including services, according to balance of payments data for the 12 months to December 2024. This level reflects a relatively strong external buffer, crucial for sustaining investor confidence amid global economic uncertainty.

The month-on-month increase in reserves is mainly driven by consistent inflows from foreign investors, signaling renewed confidence in Nigeria’s financial markets. The resurgence has been supported by attractive carry-trade returns, improving macroeconomic conditions, and a stable FX environment.

Additionally, the decline in FX demand due to reduced import activity as businesses and consumers adjust to higher FX costs has contributed to easing pressure on reserves.

Looking ahead, continued offshore inflows and expected external borrowings are projected to further boost Nigeria’s reserves. Analysts anticipate that gross reserves could rise to around $40.1 billion by year-end.