Nigeria strengthened its external financial position in 2024 with a notable increase in its gross foreign exchange reserves, reaching $40.19 billion compared to $33.22 billion a year earlier, representing a rise of over 20%. This improvement resulted from the implementation of structural reforms undertaken to combat the weakening external accounts and restore macroeconomic stability.
Specifically, the Central Bank of Nigeria has implemented policies aimed at reducing foreign exchange market volatility and attracting foreign investment. Furthermore, increased non-oil exports have improved foreign exchange inflows, thereby reducing reliance on oil revenues, which are typically volatile.
The Central Bank of Nigeria's gross foreign exchange reserves, comprised of foreign currency held by the central bank, play a vital role in the stability of the naira, the financing of imports, and the inflow of foreign capital. Their increase reflects more rigorous management of financial flows and a diversification of foreign exchange revenue sources.
Despite the contraction of reserves in the first quarter of 2025, the Central Bank remains optimistic, anticipating a recovery in the second quarter thanks to an increase in oil production and non-hydrocarbon exports.
Maintaining this trend should help Nigeria to better control exchange rate volatility, honor its external commitments and attract more investment without undermining economic growth through overly restrictive monetary policies.
