Nigeria’s Foreign Reserves Depletes by $2.55 Billion in Q1 2025 as Experts Warn of Pressure on Naira

Nigeria’s foreign reserves have declined by $2.55 billion in the first quarter of 2025, according to data obtained from the Central Bank of Nigeria (CBN).

The reserves, which stood at $40.88 billion on January 2, dropped to $38.33 billion on March 27, representing a 6.23% decline.

The decline in foreign reserves is the highest in the first quarters of the last five years, with the previous highest decline recorded in Q1 2023 at $1.57 billion. The drop in foreign reserves coincides with a decline in foreign portfolio investment (FPI) during the first quarter, with FPI declining by 30.3% between January and February.

Experts have attributed the decline in foreign reserves to a lack of foreign exchange (FX) inflows into the economy, minimal petrodollar earnings, and the CBN’s intervention in the FX market to support the naira. Charles Abuede, research lead at Cowry Asset Management Limited, said the decline in foreign reserves indicates a lack of FX inflows into the economy, which could be due to minimal petrodollar earnings and the CBN’s ongoing efforts to defend the naira.

Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), echoed Abuede’s stance, saying that regular interventions by the CBN must have been depleting the reserves gradually. Yusuf also linked the decline to the drop in FPI, which he said could be worsened by the increase in import tariff in the United States and the possibility of a hike in US interest rate in response to an impending increase in the inflation rate.

The decline in foreign reserves is expected to put pressure on the naira, threatening the gains made in Q1. Abuede said the decline will exert further pressure on the local currency, as the apex bank continues its intervention. Yusuf also said the decline will fuel speculation in the FX market and create “anxiety about the current stability,” thereby triggering additional pressure on the exchange rates, which may lead to further depreciation in the currency.

To mitigate the challenge, experts have advised the federal government and the CBN to ensure a steady inflow of FX into the economy. Abuede said achieving the 2025 budget target of 2.06 million barrels per day (mbpd) of crude oil production is crucial to increasing the foreign reserves. He also advised diversifying FX sources beyond crude oil and implementing policies that attract foreign investment and boost remittance inflows.

Yusuf advised the CBN not to stop its current intervention in the FX market, which has helped to ensure a market that is liberal and has minimum encumbrances. He also recommended ramping up oil production, continued support for initiatives around investment in gas, and encouraging Nigerians in the diaspora to invest in Nigeria through financial instruments and more.