Market News

•As IMF cautions against continued accumulation

NIGERIA’S external reserves have climbed by approximately $1 billion in just 14 days, bringing the country’s foreign exchange buffer increasingly close to the Central Bank of Nigeria’s (CBN) ambitious 2026 target of $51.04 billion.

According to data released by the CBN, gross external reserves stood at $50,886,342,486.60 as of June 16, 2026, up from $49,800,457,238.56 on June 1. The $1.086 billion gain in the first half of June extends a sustained build-up that has seen reserves cross the $50 billion psychological mark.

This latest surge represents an increase of $12.99 billion, or 34.35 percent, from $37.82 billion recorded exactly one year earlier on June 16, 2025. Analysts describe it as the highest reserve position in nearly 17 years, bolstering the CBN’s capacity to defend the naira and maintain stability in the foreign exchange market.

The reserve accumulation comes on the back of improved dollar inflows, higher oil revenues, foreign exchange reforms, and stronger diaspora remittances under President Bola Tinubu’s administration.

CBN Governor Olayemi Cardoso had in May hailed the growing buffer, saying it “continues to reinforce investor confidence in the Nigerian economy and support exchange rate stability.”

In May alone, reserves expanded by $1.22 billion. Between mid-May and mid-June, the country added $2.24 billion, with consistent daily gains observed after crossing $50 billion on June 5. The naira also reflected some strength, closing May 2026 at around N1,372/$, better than N1,585/$ in May 2025.

However, the International Monetary Fund (IMF) has urged caution. In its latest Article IV review, the Fund warned that rapid reserve accumulation may be slowing the naira’s adjustment toward its estimated fair value. The IMF’s Real Effective Exchange Rate (REER) assessment indicates the naira remains undervalued by about 25.6 percent.

“A negative REER gap suggests that the naira remains weaker than economic fundamentals would imply,” the IMF noted. “Given the assessed REER undervaluation, slowing the pace of reserve accumulation and continuing to allow two-way movement of the naira exchange rate, combined with strengthening FX market functioning and advancing fiscal and structural reforms — particularly those that can improve non-oil/gas exports — would help close the gap.”

The Fund highlighted that Nigeria’s REER strengthened by 32 percent in 2025 despite a 5.2 percent weakening in the nominal effective exchange rate. It estimates the naira should be trading closer to N1,130–N1,142 per dollar based on economic fundamentals, compared to recent official rates hovering around N1,356/$.

The Tinubu administration’s sweeping FX reforms since June 2023 unified multiple exchange windows and introduced greater flexibility, initially causing sharp depreciation but improving transparency and liquidity over time. Official rates improved from N1,535/$ at end-2024 to N1,435/$ by end-2025.

While the strong reserves provide a vital cushion amid global uncertainties, the IMF’s advice underscores a delicate balancing act: maintaining buffers for stability while allowing market forces to correct currency misalignment and support broader economic recovery.

The CBN is expected to continue its strategy of gradual accumulation toward the $51.04 billion target by year-end, up from the $45.01 billion benchmark for 2025. Market watchers will be closely monitoring how the apex bank navigates the tension between reserve defence and naira flexibility in the coming months.