Nigeria’s economic outlook brightened this week as the nation’s external reserves surged to $41.046 billion — the strongest level in four years — raising hopes of greater currency stability and renewed investor confidence.
According to fresh data from the Central Bank of Nigeria (CBN), the reserves hit this milestone on 20 August 2025, the highest since December 2, 2021. This marks a dramatic turnaround from last year, when reserves fell to near $31 billion after years of heavy interventions to support the naira.
Analysts attribute the rebound to wide-ranging CBN reforms designed to restore transparency, confidence, and discipline to the foreign exchange market. These include clearing over $7 billion in verified FX forwards, unifying exchange rates to eliminate arbitrage, and launching the Nigeria Foreign Exchange (FX) Code to align with global best practices.
“Robust reserves strengthen the currency, inspire confidence, and position the economy as healthy and attractive to investors,” explained Dr. Muda Yusuf, Chief Executive of the Centre for the Promotion of Private Enterprise. “This builds trust both domestically and internationally, stabilises the exchange rate, and helps moderate inflationary pressures.”
Dr. Yusuf stressed that with a stronger reserve buffer, Nigeria is better positioned to meet external obligations, reduce speculative attacks on the naira, and create a more resilient investment environment.
Although reserves rose by only 0.39% year-to-date, most of the accretion occurred in August alone. From $39.54 billion on August 1, reserves expanded by $1.5 billion (3.8%) in just 20 days — a development described by financial experts as “a clear vote of confidence” in Nigeria’s reform trajectory.
Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co, noted that the growth reflects deliberate CBN strategies: “The reforms are sanitising the FX market and encouraging portfolio investors. Elevated yields on government securities and OMO auctions, combined with positive oil prices and stable output, are attracting strong inflows.”
CBN Governor Olayemi Cardoso reinforced optimism at the last Monetary Policy Committee meeting:
> “We have acted as a catalyst, and the numbers are proving it is beginning to happen. Believe me, the momentum is building, and it will only grow stronger.”
The positive sentiment has already reflected in the currency market. On Thursday, the naira appreciated slightly to ₦1,535.78/$ at the Nigerian Foreign Exchange Market (NFEM), compared to ₦1,536.73/$ the previous day, while holding steady between ₦1,545 and ₦1,550/$ in the parallel market.
Investment analysts are bullish that reserves will maintain their upward trajectory. CardinalStone forecasts that reserves could climb further above $41 billion by year-end, driven by the federal government’s plan to secure $3.2 billion in external borrowings to finance fiscal priorities, as well as sustained inflows from portfolio investors.
FBNQuest Merchant Bank added that improved FX inflows are rekindling foreign investor appetite, buoyed by attractive carry trade opportunities and relatively stable global conditions. However, the bank cautioned that Nigeria’s reliance on short-term portfolio flows poses vulnerabilities, given their sensitivity to global risk sentiment and domestic policy shifts.
The surge in reserves comes at a time when Nigeria is battling inflation, currency volatility, and fiscal pressures. Yet, the $41 billion buffer signals a stronger financial position for Africa’s largest economy, with analysts describing it as both a psychological and economic win.
As Dr. Yusuf put it:
> “This is a very positive development. It shows reforms are taking root, and confidence is slowly returning. The real challenge is sustaining this momentum to achieve long-term stability.”
For now, the rising reserves and a cautiously strengthening naira provide a much-needed glimmer of hope — and a signal that Nigeria may be turning a critical economic corner.
PIONEER NEWS 