February Foreign Exchange Reserve Drops by $1.3bn
Nigeria’s foreign exchange reserves fell by $1.31bn in February 2025, reflecting sustained external pressures amid the recent appreciation of the naira.
Data from the Central Bank of Nigeria (CBN) showed that reserves declined from $39.72bn on January 31, 2025, to $38.42bn on February 28, 2025, representing a 3.3 per cent drop within the month.
The decline in February was slightly higher than the $1.16bn drop recorded in January, highlighting the continued strain on the country’s external reserves.
The steady depletion of reserves has raised concerns amid rising speculations that the apex bank’s sustained interventions in the foreign exchange market, aimed at bridging liquidity gaps and stabilising the naira, have come at the cost of reducing external reserves.
Despite this, the local currency strengthened significantly against major foreign currencies in February, suggesting that the CBN’s efforts have had some positive impact in restoring confidence in the market.
Nigeria’s reserves recorded a consistent decline throughout February, with no single day of increase.
At the beginning of the month, reserves stood at $39.60bn on February 3, dropping to $39.54bn on February 4, signalling the start of a downward trend.
By February 7, reserves had fallen to $39.04bn, slipping further to $39.27bn on February 10.
The downward trajectory persisted into the second week of the month, with reserves standing at $39.15bn on February 12 and declining to $38.88bn by February 17.
By the third week of February, reserves had weakened further, dropping to $38.72bn on February 19 and $38.69bn on February 21.
As the month drew to a close, reserves had further declined to $38.41bn on February 28, reflecting a continuous downward trend throughout the month.
The fall in reserves has been attributed to multiple factors, including Nigeria’s heavy dependence on imports, which exerts pressure on foreign exchange reserves.
The country remains highly reliant on imports of industrial goods and food supplies, leading to high FX outflows.
Although oil prices have rebounded in recent months, Nigeria’s oil production challenges, crude theft, and pipeline vandalism have constrained forex inflows from the oil sector, limiting the CBN’s ability to shore up reserves.
The depletion of external reserves has also raised concerns over Nigeria’s capacity to meet external debt obligations.
The country holds significant foreign debt, and a further decline in reserves could weaken its ability to make timely debt repayments, potentially increasing borrowing costs.
A lower reserve level could also affect Nigeria’s credit rating and investor confidence, making it more expensive for the government to access international capital markets.
Despite the steady decline in reserves, the naira made notable gains against major foreign currencies in February, marking its strongest performance since the beginning of the year.
By the end of the month, the naira appreciated against the US dollar, closing at N1,540/$ from N1,620/$ at the start of the month, reflecting a 7.41 per cent gain.
It also strengthened against the British pound, rising from N2,000/£ to N1,910/£, marking a 4.50 per cent increase. Similarly, the naira appreciated against the euro, improving from N1,660/€ to N1,550/€, showing a 6.34 per cent gain.
The official exchange rate followed a similar trend, stabilising above N1,500/$ in the final weeks of February.
Data from the Nigerian Autonomous Foreign Exchange Market showed that the naira closed at N1,496/$ at the official window, narrowing the gap between the official and parallel market rates.
The convergence of the official and parallel market exchange rates indicates that Nigeria may be moving towards a unified forex market, reducing the speculation and arbitrage that have previously contributed to forex volatility.
