Nigeria’s foreign exchange reserves experienced a significant decline of $1.31 billion in February 2025, reflecting sustained external pressures despite the strengthening of the naira against major foreign currencies.
According to data from the Central Bank of Nigeria (CBN), the country’s reserves fell from $39.72 billion on January 31, 2025, to $38.42 billion on February 28, 2025, marking a 3.3 percent drop within the month.
The decline recorded in February exceeded the $1.16 billion drop witnessed in January, signaling persistent strain on Nigeria’s external reserves.
An analysis of the data reveals a continuous depletion of Nigeria’s foreign reserves throughout February, with no periods of recovery.
The reserves stood at $39.60 billion on February 3, slightly down from $39.72 billion recorded at the end of January. By February 4, reserves had decreased to $39.54 billion, initiating a downward trend that continued for the rest of the month.
By February 7, reserves had dropped to $39.04 billion, followed by another decline to $39.27 billion by February 10. This downward movement persisted into the second week, with reserves reaching $39.15 billion on February 12 and further reducing to $38.88 billion by February 17.
The third week of February saw continued depletion, with reserves falling to $38.72 billion on February 19 and further to $38.69 billion by February 21. By February 28, reserves had declined further to $38.41 billion, marking a significant reduction from where they stood at the beginning of the month.
The continued drawdown in Nigeria’s foreign reserves raises concerns about the central bank’s strategy for managing exchange rate volatility, forex market liquidity, and overall macroeconomic stability.
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Despite a recent rebound in crude oil prices, Nigeria has struggled to maximize foreign exchange earnings due to production challenges, pipeline vandalism, and oil theft. As oil revenue remains the country’s primary source of forex, these constraints have hampered efforts to build up reserves.
Beyond interventions by the CBN to support the naira and inject liquidity into the official forex market, Nigeria’s reliance on reserves for critical imports and servicing external debt obligations is another major contributing factor to the depletion.
The country remains highly dependent on imports for industrial goods and food supplies, necessitating significant forex outflows.
The continued decline in reserves raises concerns about Nigeria’s ability to meet its external debt obligations, given the country’s substantial external debt stock.
A further drop in reserves could limit the government’s capacity to meet repayment schedules, potentially increasing borrowing costs.
A lower reserve level may also affect investor confidence, influencing capital inflows and foreign direct investment. If the trend persists, Nigeria may face increased pressure to secure external funding to maintain macroeconomic stability.
Despite the decline in reserves, the naira experienced a significant rebound in February, appreciating against the US dollar, British pound, and euro in both the official and parallel forex markets.
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This marked a reversal from its previous downward trend, offering relief to businesses and traders.
By the end of February, the naira had strengthened against the US dollar to N1,540/$ from N1,620/$, reflecting a 7.41 percent appreciation. Similarly, it gained against the British pound, improving to N1,910/£ from N2,000/£, a 4.50 percent increase. Against the euro, the naira appreciated to N1,550/€ from N1,660/€, marking a 6.34 percent gain.
The official exchange rate mirrored this trend, stabilizing slightly above N1,500/$ in the weeks leading up to the end of February.
According to data from the Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira settled at N1,496/$ in the official market by the month’s close.
Since the beginning of 2025, the naira had been trading above N1,600/$ in the parallel market. However, its February resurgence saw it strengthen to a yearly low of N1,480/$ on February 26 before stabilizing around N1,500/$ by month-end.