FX reserves fall by $359.8m in one week

Nigeria’s foreign exchange reserves have declined, shedding $359.81m in one week to settle at $40.56bn as of January 13, 2025.

This drop follows a brief peak of $40.91bn on January 7, 2025, highlighting a steady downward trend in the nation’s reserves.

Data from the Central Bank of Nigeria highlights the fluctuating nature of Nigeria’s external reserves, which are vital for stabilising the economy and maintaining investor confidence.

At the close of 2024, the reserves stood at $40.88bn, indicating a relatively stable position as the country entered the new year.

However, by January 6, reserves had risen modestly to $40.92bn before peaking at $40.91bn on January 7.

The decline began immediately afterwards, with reserves falling by 0.88 per cent, or $351.89m, within six days.

On January 8, reserves dropped to $40.85bn, reflecting a daily reduction of $60.31m. This marked the start of a steady erosion of gains achieved late last year.

By January 9, reserves had dipped to $40.80bn, representing a daily drop of $49.15m, and fell further to $40.75bn on January 10, losing $50.35m compared to the previous day.

The sharpest decline occurred between January 10 and 13, when reserves fell to $40.56bn, a cumulative loss of $192.39m in just three days.

Overall, the reserves experienced a weekly decline of 0.88 per cent, raising concerns about the factors driving the losses and their potential implications.

The sustained drop in foreign reserves has serious implications for Nigeria’s economic stability. These reserves are crucial for supporting the naira during periods of market volatility, financing imports, and repaying external debts.

A continued depletion could undermine the CBN’s capacity to stabilise the currency and meet international obligations.

Rising import costs, external debt servicing, and interventions in the foreign exchange market to support the naira are among the factors likely contributing to the decline.

Heightened demand for dollars in the market and the CBN’s efforts to manage forex liquidity have added further pressure.

Nigeria’s reliance on imports for consumer goods, machinery, and industrial inputs, coupled with limited export diversification, exacerbates the strain on reserves.