Nigeria’s foreign exchange reserves fell sharply by $1.16 billion in January 2025, marking the steepest monthly drop since April 2024. The reserves, which stood at $40.88 billion at the end of December 2024, declined to $39.72 billion by January 31, 2025, according to the Central Bank of Nigeria (CBN).
The decline coincides with the CBN’s renewed intervention in the FX market, including increased dollar sales to Bureau De Change (BDC) operators, aimed at stabilizing the naira. The bank permitted BDCs to purchase up to $25,000 weekly, extending the directive to May 30, 2025.
CBN Governor Yemi Cardoso attributed the plunge to measures aimed at restoring market confidence. “While the decline is significant, our efforts are focused on ensuring liquidity and curbing speculative attacks on the naira,” he said.
Steady Decline Over January
Data from the CBN revealed a steady decline throughout January, with reserves falling below the critical $40 billion mark on January 22. By month-end, reserves had dropped by 2.84%, raising concerns over Nigeria’s ability to meet external obligations such as debt repayments and import financing.
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This recent decline follows a trend observed in April 2024, when reserves plunged by $2.16 billion in one month. Despite this, the naira showed signs of recovery, strengthening to N1,475/$1 at the Nigerian Foreign Exchange Market (NFEM) by January 31, 2025, its best performance since June 2024.
Market Stabilization Efforts
The CBN’s interventions in December and January injected liquidity into the FX market, calming volatility in the parallel market. A BDC operator in Lagos said, “The increased dollar sales have eased pressure on the naira, which is stabilizing at both official and parallel market rates.”
However, analysts warn that sustaining these measures without robust reserve growth could strain Nigeria’s external liquidity. “The short-term gains in naira stability may come at the cost of long-term financial sustainability,” said a financial analyst, Ugo Nwosu.
Looking Ahead
The CBN’s extension of dollar sales to BDCs until May 30, 2025, is expected to maintain short-term stability. However, experts highlight the need for structural reforms to reduce dependence on external reserves for currency stabilization.
