Why Nigeria’s External Reserves are Growing Again After Six Years

Nigeria’s external reserves have bounced back to levels not seen in over six years, hitting $42.225 billion as of September 25, 2025. 

According to Central Bank of Nigeria (CBN) data, this marks a sharp improvement, with more than $692 million added in just 18 days. The last time the country came close to this level was in September 2019, when reserves stood at $41.992 billion.

This build-up comes at a time when oil prices are still below $70 per barrel, lower than Nigeria’s budget benchmark of $75. So, what exactly is driving this rebound, and what does it mean for the economy?

Oil is still helping matters

Oil remains Nigeria’s strongest foreign exchange earner, and analysts say improved output has been a key factor behind the growing reserves. 

Production has picked up compared to previous years when theft, vandalism, and underinvestment crippled output.

Dr. Muda Yusuf, economist and former DG of the Lagos Chamber of Commerce and Industry, explained that higher oil production, alongside better transparency at the Nigerian National Petroleum Company (NNPC), has helped boost inflows. 

According to him, “Our oil output has improved, and the NNPC is being managed more transparently than before. These changes are part of what’s driving confidence and bringing in fresh forex inflows.”

Confidence returns to the economy

Beyond oil, Nigeria’s broader economic environment has shown signs of stability. The CBN’s recent reforms, especially in the foreign exchange market, are attracting inflows from different sources.

• Diaspora remittances: With a weaker naira, money sent home by Nigerians abroad has become more attractive, adding to the foreign exchange pool.
  
• Non-oil exports: Reforms have encouraged exporters to bring back proceeds, further strengthening inflows.
  
• External loans: When the government secures loans in foreign currency, the funds sit in the CBN while expenditures are made in naira, temporarily boosting reserves.
  
• Lower fuel imports: With Dangote Refinery producing refined products locally, Nigeria has reduced its import bills, easing pressure on reserves.
  

These combined factors are creating stronger buffers and reducing the risk of forex shortages.

Stronger import cover

Nigeria’s external reserves now provide over nine months of import cover, which analysts say is a very comfortable position. For perspective, emerging economies are considered safe if they can cover six months of imports. 

This means Nigeria is currently in one of its strongest positions in years when it comes to handling external shocks.

Damilare Asimiyu, Head of Research at Afrinvest, highlighted that portfolio inflows attracted by high-yield government securities are also playing a part. In his words, “At $42 billion, reserves now provide well over nine months of import cover. This signals a positive outlook for Nigeria’s external sector stability.”

CBN’s role in the rebound

The Central Bank of Nigeria has also been firm with policies aimed at managing forex demand. 

By tightening access to foreign exchange, monitoring imports more closely, and enforcing compliance, the CBN has managed to reduce speculative activities in the market.

Governor Olayemi Cardoso, in his latest Monetary Policy Committee briefing, pointed out that gross reserves had climbed even higher in September to $43.05 billion, compared to $40.51 billion just two months earlier. He credited this to improved oil sector performance, which grew over 20% in Q2 2025, alongside restored investor confidence.

Can this momentum last?

While the gains are significant, experts caution that sustaining them will require discipline. Nigeria’s heavy reliance on oil means that any setback in production or global oil prices could quickly erode the reserves. 

Rising debt service obligations, which must also be paid in foreign currency, remain another pressure point.

Dr. Yusuf noted that keeping investor confidence high and maintaining stability in the oil sector will be crucial. “If reforms continue and confidence remains, inflows are likely to sustain. But debt sustainability and oil sector stability are critical to holding on to these gains,” he said.

What to expect?

Nigeria’s external reserves crossing the $42 billion mark is more than just a financial milestone, it signals that some of the government’s reforms are beginning to take root. 

With stronger import cover, more stable forex inflows, and renewed confidence in the economy, the country now has a better cushion against external shocks.

But the challenge is clear: Nigeria must not only manage its oil-dependent inflows better but also diversify its economy to ensure these gains do not fade away with the next dip in oil prices.