Nigeria’s external reserves are expected to remain resilient in 2026, hovering around the $45 billion mark, supported by sustained diaspora remittances, improved oil earnings and planned external borrowings, analysts have said.

The country’s reserves have sustained an upward trajectory, reaching a seven-year high of $46.7 billion in November 2025. At that level, reserves provided about 10.3 months of import cover for goods and services, signalling stronger external buffers amid renewed investor confidence, improved oil receipts and healthier balance-of-payments inflows.

Analysts at Coronation Securities note, however, that the critical challenge heading into 2026 will be converting recent gains into lasting resilience — shifting from largely cyclical inflows to more stable, long-term sources of foreign exchange capable of supporting growth and cushioning the economy against future shocks.

The naira closed flat at the official foreign exchange (FX) market as reserves climbed to $46.7 billion, buoyed by recent Eurobond issuance and the strongest FX inflows recorded in six months. Market watchers say the steady currency performance reflected rising inflows driven by renewed foreign investor interest, policy reforms and lower FX pressures from fuel imports, alongside stronger oil, non-oil export and remittance inflows.

Data from the Central Bank of Nigeria (CBN) show that gross international reserves (GIR) rose to $40.88 billion in 2024, equivalent to about 17.25 percent of nominal GDP, up from $32.91 billion in 2023. The momentum continued in 2025, with reserves peaking above $43.20 billion by late October, the highest level since late 2021. Analysts say the stronger reserve position has given the CBN more room to manage exchange rate volatility while reinforcing foreign investor confidence.

Recent reserve accretion has been driven by several converging factors. Chief among them is the resurgence of foreign portfolio investment (FPI), particularly into high-yielding Nigerian fixed-income securities. Following a shift towards tighter and more orthodox monetary policy, investor appetite has improved, supported by elevated interest rates and clearer FX market signals. Capital importation rose to about $12.32 billion in 2024 from $3.91 billion in 2023, with portfolio flows accounting for roughly 68 percent of total inflows.

Analysts also point to the sharp reduction in Nigeria’s petrol import bill following the removal of fuel subsidies. With subsidies scrapped, FX demand for petrol imports has eased significantly, reducing pressure on reserves. Although some legacy obligations remain, no major new FX liabilities have emerged from fuel imports since 2024.

Stronger oil and gas earnings have provided additional support. While production challenges persist, improved receipts and reduced repatriation of earnings by international oil companies have helped shore up FX inflows. In parallel, non-oil export proceeds have shown gradual improvement. Diaspora remittances have also emerged as a steady cushion, supported by reforms targeting International Money Transfer Operators, including market-reflective exchange rates and improved transparency.

Confidence has further improved following the clearance of the long-standing FX backlog. By settling arrears owed to airlines, investors and corporates, the CBN removed a key source of uncertainty that had previously discouraged inflows. Eurobond issuance and multilateral financing have provided episodic boosts, although analysts caution that such inflows are not permanent sources of external strength.

Behind the rebound lies a broader policy shift. Since 2024, the CBN has moved away from quasi-fiscal interventions towards tighter monetary discipline and a more market-reflective FX regime. Electronic FX matching, the Nigerian FX Code and more rules-based interventions have improved transparency and price discovery. Aggressive liquidity management and rate hikes, which lifted the policy rate to 27.50 per cent in 2024, helped anchor inflation expectations and restore investor confidence.

Despite recent gains, analysts warn that Nigeria’s reserves have historically been cyclical. Looking ahead, they say sustainability in 2026 will depend less on short-term portfolio flows and more on durable FX sources such as improved oil production, stronger non-oil exports, stable diaspora remittances and increased foreign direct investment. While the outlook is improving, experts stress that sustained policy consistency and structural diversification will be essential to prevent recent gains from proving fragile.

 

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