How Nigeria’s CBN Can Buy Gold to Build Foreign Reserves

Nigeria is sitting on one of the most underutilised monetary levers in all of Africa: domestic gold. Rather than spending scarce dollars on the international bullion market, the Central Bank of Nigeria (CBN) has developed a framework that converts locally mined gold directly into foreign reserve assets, all without drawing down a single dollar of existing reserves.

Central banks traditionally accumulate reserve assets by purchasing foreign currencies or internationally traded commodities using hard currency. Nigeria’s approach differs because it uses domestic mineral resources to expand reserves while conserving scarce dollars.

Nigeria’s Gold Reserve Position

Metric	Figure	Source / Date
CBN gold holdings (value)	$3.5 billion	CBN, March 2026
CBN gold holdings (volume)	687,402 troy ounces	CBN Audited Financials 2024
Gold reserve value in 2023	N1.28 trillion	CBN 2023
Gold reserve value in 2024	N2.77 trillion	CBN 2024
Gross external reserves	~$49.3 billion	CBN, March 2026
Net external reserves (2025)	$34.80 billion	CBN Governor Cardoso
Gold price (end of 2024)	$2,624.39/oz	LBMA benchmark
Gold smuggling annual loss	~$9 billion	Industry estimates
Mining sector growth (2024)	4.85%	NBS

The CBN valued its gold bullion at a market price of $2,624.39 per ounce at the end of 2024, compared to $2,062.98 per ounce the previous year. Although the volume of gold holdings remained unchanged at 687,402 troy ounces, the value surge was driven by a sharp rise in global gold prices.

For the first time ever, spot gold rose above $5,000 an ounce in January 2026, extending a powerful rally that saw the precious metal gain more than 60% in 2025. For a country holding over 687,000 troy ounces, that price trajectory translates directly into a stronger reserve position at zero additional cost.

The National Gold Purchase Programme (NGPP): How It Works

The engine behind Nigeria’s gold for reserves strategy is the National Gold Purchase Programme (NGPP), a framework built on a simple but powerful principle: use naira to buy local gold, then let that gold function as a dollar denominated reserve asset.

The philosophy, as described by Minister of Solid Minerals Development Dele Alake, is straightforward: “We use our local naira, not foreign exchange, to mop up gold, then sell it to the CBN.

The CBN in turn, makes part of the payment in naira but the gold kept in its vault becomes a foreign currency asset. The process thereby increases the value of our foreign reserves and reduces the pressure on the local currency.”

The Four Step Mechanism

Step 1: Aggregation at source. The NGPP is structured as a centralised gold offtake scheme supported by a decentralised network of cooperatives and artisanal mining groups across Nigeria. Miners sell to licensed buying centres and aggregators in key states including Zamfara, Osun, Kebbi, and Niger.

Step 2: Supply chain management by SMDF. The Solid Minerals Development Fund (SMDF) oversees the entire supply chain, ensuring responsible sourcing and due diligence at every stage. The SMDF oversees the supply chain and ensures that the metal meets internationally recognised responsible sourcing standards.

Step 3: Refining to LBMA standard. Raw gold is processed to meet the London Bullion Market Association (LBMA) Good Delivery Standard, the globally recognised benchmark that enables international trade in gold bars. Without this step, the gold cannot function as a reserve grade asset.

Step 4: CBN purchase in naira. CBN Governor Olayemi Cardoso explained that the gold was acquired in naira, with pricing linked to LBMA benchmarks, ensuring that foreign currency reserves were preserved while strengthening Nigeria’s gold holdings.

Why This Matters: The Macroeconomic Case

1. Reserve Diversification Away From Oil Dependency

Nigeria’s foreign reserves have historically moved in lockstep with crude oil prices. When oil falls, reserves fall, the naira weakens, and imported inflation rises. Gold breaks that correlation.

By incorporating gold into its reserve portfolio, Nigeria is transforming the metal from an informal, largely artisanal commodity into an instrument of economic policy. The initiative aims to diversify the country’s reserve assets, strengthen the naira, and stimulate domestic industrial growth.

2. A Hedge Against Dollar Volatility

Gold has regained importance as a hedge against inflation and volatility, while other critical minerals are increasingly shaping global supply chains and advanced industrial development, as CBN Governor Cardoso has noted publicly.

With US Federal Reserve policy, geopolitical tensions, and the dollar’s reserve dominance all under pressure, holding gold provides a buffer that no foreign currency can fully replicate.

3. No Foreign Exchange Cost

This is the most distinctive feature of Nigeria’s model. The structure allows the CBN to accumulate reserve assets in a way that strengthens both macroeconomic stability and domestic industry, without spending hard currency to do it. The transaction is entirely naira-denominated on the acquisition side, while the asset itself is priced and recognised internationally in dollars.

4. The Reserve Growth Is Already Visible

Nigeria’s net external reserves surged by 772% over two years to $34.80 billion at the end of 2025, up from $3.99 billion in 2023. Gross external reserves rose to $45.71 billion from $40.19 billion over the same period. Gold accumulation, alongside exchange rate reform and improved FX management, has been a meaningful contributor to this trajectory.

Case Study: From First Transaction to $3.5 Billion

The NGPP’s journey from pilot to policy demonstrates how quickly a well-structured programme can scale.

June 2024: First commercial transaction. The first commercial transaction under the NGPP delivered over US$5 million increase in Nigeria’s foreign reserve assets, more than 70 kilograms of gold refined to the London Bullion Market Good Delivery Standard, and the successful aggregation of locally mined gold, injecting about NGN6 billion into the rural economy. Minister Alake presented gold bars directly to President Tinubu, marking a symbolic and practical milestone.

2025: Scaling up. The Federal Government spent about N12.5 billion to purchase gold from artisanal and small-scale miners as part of efforts to formalise the sector, reduce smuggling, and strengthen the nation’s foreign reserves through the NGPP. The transaction was described as part of a presidentially approved intervention to enhance capacity, efficiency, and transparency within Nigeria’s small-scale mining ecosystem.

March 2026: $3.5 billion milestone. Nigeria raised its gold reserves to $3.5 billion after the central bank acquired a fresh batch of domestically sourced bullion, as part of efforts to diversify foreign assets while preserving scarce foreign exchange.

Expert Views

“The partnership between the CBN as sole off-taker and the SMDF as fiscal and supply chain manager provides a model for other countries seeking to establish similar programmes.”
Kurtulus Taskale Diamondopoulos, Director of Central Banks and Public Policy, World Gold Council

“There is no amount of economic calculation you can do that will be faster in terms of shoring up our foreign reserves than this particular gold programme.”
Dele Alake, Minister of Solid Minerals Development

“By purchasing domestically refined gold without deploying foreign currency, the transaction enhances reserve accretion and supports broader macroeconomic stability objectives.”
Olayemi Cardoso, Governor, Central Bank of Nigeria

Experts from the World Gold Council, KPMG, and the Africa Finance Corporation have all described these reforms as potentially transformative for Nigeria’s non-oil economy, while also flagging structural challenges including security, environmental risks, and infrastructure gaps that must be addressed for the programme to reach its full potential.

What Needs to Be Done to Scale It Further

Expand the Licensing Base

Reports suggest that up to 95% of gold in Nigeria is illegally mined, with revenues not remitted to the country. The vast majority of artisanal miners currently operate without formal registration, not by choice, but because the licensing process is inaccessible.

Expanding the Nigerian Mining Cadastre Office’s registration infrastructure, particularly in remote mining communities, is a precondition for expanding supply into the NGPP.

Invest in Domestic Refining Capacity

Gold sourced from artisanal miners cannot go directly into CBN reserves. It must first be refined to LBMA Good Delivery standard.

The government is investing in refining capacity, expanding exploration programmes supported by more than $630 million in funding, and integrating mineral resources into central bank reserve management strategies. Accelerating this investment removes a critical bottleneck.

Make Payments Fast and Accessible

Artisanal miners operate on thin margins and have limited tolerance for bureaucratic delays. Prompt naira settlement, ideally through mobile payment infrastructure, is essential.

The gold for naira exchange must feel more financially attractive than selling to informal intermediaries, which currently offer speed and no paperwork in exchange for a lower price.

Combat Smuggling Through Competitive Pricing

Authorities estimate that gold smuggling costs the country nearly $9 billion annually in lost revenue. The NGPP’s best weapon against this is a simple one: offer market-linked prices consistently and reliably.

When the official channel pays fairly and quickly, the economic case for smuggling weakens. The programme also aims to curb gold smuggling and reposition the solid minerals sector for greater productivity and transparency.

How Nigeria’s Approach Compares Globally

Country	Strategy	Key Feature
Nigeria	Buy domestic gold in naira via NGPP	Zero FX cost; formalises artisanal miners
Turkey	Aggressive open market gold buying since 2017	Diversify away from dollar reserves
China	Steady multi-year accumulation	Reduce USD exposure and geopolitical risk
Ghana	Gold for oil programme	Use gold to pay for petroleum imports
Russia	Built 2,300 plus tonnes before 2022 sanctions	Sanction-proof reserve buffer

Nigeria’s model is arguably the most innovative of the group. It builds reserves at zero dollar cost while simultaneously formalising an informal sector that was haemorrhaging billions in illicit outflows.

For further context on global central bank gold strategies, the World Gold Council research portal provides detailed annual data on central bank gold demand trends.

For Nigeria-specific mining sector data and licensing frameworks, the Nigerian Mining Cadastre Office is the authoritative source.

Frequently Asked Questions (FAQ)

Q: Does the CBN buy gold with dollars?

No. Under the NGPP, the CBN purchases gold in naira at prices benchmarked to LBMA international spot rates. This means no foreign currency is spent to acquire the asset. Once purchased, the gold is classified as a foreign reserve asset because it is priced and recognised internationally in US dollars.

Q: Where does Nigeria’s gold come from?

Nigeria’s gold deposits are concentrated in Zamfara, Osun, Kebbi, Niger, and several other states. Official production reached 3,400 kilograms in 2023, while the Segilola Gold Mine, the country’s only industrial scale operation, produced approximately 2.6 tonnes in 2025. Artisanal and small scale mining accounts for more than 90% of total production.

Q: What is the SMDF’s role in the programme?

The Solid Minerals Development Fund (SMDF) acts as the fiscal and supply chain manager for the NGPP. It aggregates gold from artisanal miners and cooperatives, oversees the refining process to LBMA standards, and delivers LBMA compliant bullion to the CBN.

Q: How does buying gold locally strengthen the naira?

By converting domestic gold into a dollar denominated reserve asset, the CBN increases its capacity to defend the naira during periods of external shock without needing to burn through dollar reserves. Stronger reserves signal stability, reduce speculative pressure on the naira, and improve Nigeria’s credibility with international investors and rating agencies.

Q: How much gold does Nigeria currently hold?

As of early 2026, the CBN holds approximately 687,402 troy ounces of gold, valued at $3.5 billion. This figure is expected to grow as the NGPP scales and global gold prices continue their upward trajectory.

Q: What is the biggest challenge facing the programme?

The three most significant challenges are the dominance of informal and unlicensed mining, which accounts for over 90% of production; gold smuggling, estimated to cost Nigeria nearly $9 billion annually in lost revenue; and infrastructure gaps in refining capacity and financial access for remote mining communities.