Nigeria’s FX Reserves Experience $1.3 Billion Drop in February, CBN Report Shows

Nigeria’s foreign exchange reserves witnessed a notable decrease of $1.31 billion in February 2025, falling from $39.72 billion to $38.42 billion. This 3.3% reduction underscores the ongoing external pressures faced by the nation, even in light of the recent appreciation of the naira. The drop in reserves has sparked concerns regarding the Central Bank of Nigeria’s (CBN) interventions in the foreign exchange market, which have been made at the expense of diminishing external reserves.

The continuous erosion of reserves can be linked to Nigeria’s significant reliance on imports, especially industrial products and food supplies. Additionally, challenges in oil production, including crude theft and pipeline vandalism, have further restricted foreign exchange inflows from the oil sector, thereby limiting the CBN’s capacity to bolster reserves.

Although oil prices have seen a recovery in recent months, Nigeria’s oil production has not aligned with this trend. The Nigerian National Petroleum Corporation (NNPC) reported that the country’s oil production averaged 1.2 million barrels per day in 2024, falling short of the 1.8 million barrels per day target.

The reduction in foreign exchange reserves has also intensified speculation regarding the CBN’s capability to sustain its foreign exchange interventions. The CBN has been actively engaging in the foreign exchange market to stabilize the naira and address liquidity shortages, but this strategy has resulted in a further decline in external reserves.

In spite of these difficulties, the naira has shown considerable strength against major foreign currencies in recent months. Data from the CBN indicates that the naira appreciated by 2.5% against the US dollar in February 2025, implying that the CBN’s measures have had a beneficial effect in restoring market confidence.

Investors SnapBack

The Nigerian stock market witnessed a notable recovery, primarily fueled by the appreciation of prices in large and medium-cap stocks. Investors capitalized on the recent decline in stock prices to acquire fundamentally robust equities, thereby reversing the negative sentiment that had previously affected the market.

Transcorp and SCOA Nigeria topped the gainers’ list, each experiencing a price increase of 9.98%, closing at N51.80 kobo. Africa Prudential followed closely with a rise of 9.87%, ending at N30.60 kobo, while Tantalizers and Caverton Offshore Support Group recorded gains of 9.72% and 9.52%, respectively.

Conversely, SUNU Assurance, MRS Oil Nigeria, and Red Star Express were among the top decliners, each declining by 10% to close at N4.77, N166.50 kobo, and N5.94 kobo, respectively. Lasaco Assurance and UPDC also experienced declines of 7.99% and 6.76%, respectively.

Analysts at Afrinvest Limited have attributed this positive market performance to enhanced investor sentiment and a diminishing interest in fixed income investments, following yield adjustments observed in the recent Treasury Bills Primary Market Auction (PMA).

 The revival in the equity market occurs against a backdrop of broader concerns regarding the influence of high fixed income yields on investors’ risk tolerance. While the slight recovery indicates that investors are selectively acquiring stocks with solid fundamentals, the long-term viability of this trend remains uncertain in light of mixed economic indicators.