Foreign reserves surge by $4.1bn on oil output, FX inflows

Nigeria’s external reserves have risen by $4.1 billion in the past two months, supported by a rebound in crude oil production and steady foreign exchange (FX) inflows.

Fresh figures from the Central Bank of Nigeria (CBN) revealed that gross official reserves climbed by $1.9 billion in August to $41.3 billion as of August 25, following a $2.1 billion increase in July.

The reserves had previously slipped to a year-low of $37.2 billion in early July. Despite the sharp rebound, the year-to-date gain remains relatively modest at $390 million.

Analysts at FBNQuest linked the improvement to stronger crude oil output, which rose to about 1.7 million barrels per day (mb/d) compared with an average of 1.55 mb/d earlier in the year.

They also cited increased foreign capital inflows supported by higher interest rates, earnings from non-oil exports, and contributions from non-bank corporates.

Current reserve levels provide coverage for 12.4 months of merchandise imports and 8.6 months when imported services are included.

However, net reserves, last reported at $23.1 billion in December 2024, paint a more cautious picture of Nigeria’s FX buffer.

Despite the overall gains, weekly FX inflows slipped to $567.2 million from $706.7 million the previous week, according to data from Coronation Merchant Bank.

Foreign portfolio investments accounted for 32.5 percent of inflows, while the CBN’s intervention contributed 30.5 percent.

During the same period, the naira appreciated by 1.1 percent at the Nigerian Autonomous Foreign Exchange Market (NAFEM), closing at N1,514.87 per dollar, while the parallel market rate held steady at N1,540.

Regional comparisons reflected a similar trend, with South Africa’s reserves climbing by $756 million to $65.9 billion and Egypt’s rising by $211 million to $49.3 billion in August.

Looking ahead, analysts at FMDQ observed that Nigeria’s reserves could receive further support if the U.S. Federal Reserve loosens monetary policy in response to a cooling labour market, a move that could stimulate fresh capital inflows into emerging markets.