Nigeria’s FX Reserves declines by $3bn at 6-Month low

Nigeria’s foreign reserves fell by $3 billion to a six month low in less than four full months amidst fluctuation in FX inflows and aggressive interventions in the currency markets. Data released by the Central Bank of Nigeria (CBN) showed that foreign reserves fell below $37.888 billion, the lowest level seen in six months. The authority said the nation’s net foreign exchange position has inched higher to $23 billion, accounting for 60% of the aggregate amount. This suggests that there is only a 40% claim against the balance in the nation’s foreign reserves.  
Slowdown in oil output and fluctuating market prices of exported crude have negatively impacted government earnings. Some analysts said government revenues have been underperforming expectations in 2025 due to macro and external uncertainties. It said that foreign portfolio investors bolstered FX inflows strongly in the first quarter until the recent shift in global investment sentiments. Offshore investors have been exiting positions in Naira assets. The authority had lured hot monies into the country with mouthwatering rates on Treasury and OMO bills. This triggered a successive rally on the Naira assets, and yield began to taper until the latest offshore investors’ risk off sentiment caused yield repricing. Analysts noted that the CBN has also scaled back on OMO bills offerings.
Foreign investors and banks played strongly in driving forex inflows through the CBN OMO bills auction, but supply has dropped sharply to one auction sale per month since February as the authority looks to cut balance sheet costs.   Hence, the FX market has come under renewed pressure in the recent weeks, driven primarily by offshore dollar demand amidst global headwinds. With negative effects of US dollar inflows, crude oil prices, which currently trade below $70 per barrel, are negative for Nigeria’s fiscal and current account positions.