Boost For Naira: Nigeria’s External Reserves Rise by $66 Million to Hit N46.11 Billion
- Nigeria's external reserves have increased by $66 million to $46.11 billion at January's end
- Brent crude prices surged 12.7% in January, boosting foreign exchange inflows
- The naira also reached near two-year high, reflecting improved market confidence and reforms
Nigeria’s external reserves recorded a modest but significant increase at the end of January, rising by $66 million to $46.11 billion, data from the Central Bank of Nigeria (CBN) show.
The 1.6 per cent month-on-month gain from $45.45 billion in December 2025 offers renewed support for the country’s foreign exchange buffers, following months of pressure driven by global volatility and domestic FX demand.
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The improvement comes at a time when the naira is enjoying its strongest run in nearly two years, reinforcing market confidence that recent reforms and tighter policies are beginning to yield results.
Oil Prices provide a timely lift
Analysts attribute the uptick in reserves largely to firmer global crude oil prices during the month.
Brent crude averaged $69.8 per barrel in January, representing a 12.7 per cent increase from December and its strongest level in several months.
The price rally was supported by heightened geopolitical tensions in the Middle East, renewed supply risks, and OPEC+’s decision to pause planned production increases.
For Nigeria, where crude oil accounts for the bulk of export earnings, higher oil prices typically translate into improved foreign exchange inflows and stronger reserve positions.
Capital inflows and borrowings add support
Beyond oil, intermittent portfolio inflows also contributed to reserve accumulation, as foreign investors showed renewed interest in Nigerian fixed-income assets.
This follows adjustments to the country’s foreign exchange framework, higher interest rates, and tighter monetary conditions that have improved yields and reduced uncertainty around FX pricing.
Proceeds from select sovereign and corporate external borrowings further bolstered reserves, while elevated remittance inflows recorded in December may have had residual positive effects, though analysts note that the exact contribution of each factor is difficult to isolate.
Naira rallies to near two-year high
The strengthening of external buffers coincided with a strong performance by the naira across FX markets.
At the official Nigerian Foreign Exchange Market (NFEM), the currency appreciated by 3.5 per cent month-on-month to close January at N1,390.50 to the dollar, its strongest level in almost two years.
The parallel market also reflected improved sentiment, with the naira gaining 1.3 per cent to trade around N1,460 per dollar.
Market watchers link the rally to improved dollar liquidity, softer global dollar dynamics, and more active central bank intervention.
Reforms and tight liquidity restore confidence
Reforms introduced over the past year, including greater transparency at the official FX window and efforts to clear outstanding FX backlogs, have helped restore investor confidence and reduce speculative demand.
In addition, tighter domestic liquidity conditions have constrained arbitrage activity, supporting short-term currency stability.
Analysts note that relatively comfortable reserve levels have enhanced the CBN’s capacity to intervene when necessary, even as structural challenges persist.
Risks remain despite short-term relief
Despite January’s improvement, Nigeria’s external reserves remain exposed to oil price swings and shifts in global risk sentiment.
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Production constraints, security challenges in the Niger Delta, and uncertainty around sustained foreign inflows continue to pose downside risks.
Still, research firms remain cautiously optimistic. Cordros Research expects the naira to remain broadly stable in the near term, citing a weaker dollar, sustained current account surplus, and elevated yields that should support capital inflows.
Afrinvest Research also noted that ongoing reforms and tight liquidity conditions have curtailed speculative activity, helping to anchor near-term FX stability.
Dollar falls to 4-year low, Naira hits new high
Legit.ng earlier reported that the US dollar has fallen to its lowest level in four years, opening door for naira and other global currencies to appreciate.
The fall of the dollar has prompted investors to shift funds into traditional safe havens such as gold, euro and the Swiss franc.
The Guardian UK reports that the dollar dropped 1.3% against a basket of major currencies on Tuesday, marking its fourth consecutive day of losses, before slipping a further 0.2% on Wednesday morning to its weakest level since February 2022.
Source: Legit.ng
