FX reserves hit $40.8bn one month after Eurobond

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Nigeria’s foreign exchange reserves surged by $591.78m in the month following the government’s $2.2bn Eurobond auction on December 2, 2024.

Data from the Central Bank of Nigeria shows that reserves increased from $40.29bn on December 2 to $40.88bn on January 3, 2025.

This represents a month-on-month growth of 1.47 per cent and highlights the positive impact of the Eurobond proceeds on the nation’s external reserves.

The growth trajectory of the reserves throughout December reflects steady accumulation, beginning with a modest rise in the first week after the Eurobond auction.

By December 9, the reserves had climbed to $40.376bn, indicating an $84m increase within seven days.

The pace of growth accelerated in mid-December, with reserves jumping from $40.525bn on December 12 to $40.790bn by December 19, a sharp rise of $265m in one week.

By the end of December, the reserves peaked at $40.884bn, with the upward trend sustained into early January.

The increase in FX reserves comes at a time when Nigeria is grappling with economic challenges, including a rising fiscal deficit and exchange rate volatility.

The proceeds from the Eurobond auction provided much-needed liquidity, helping the government shore up its reserves while addressing critical financial obligations.

This boost has positioned the country to better manage external payments and stabilise the naira.

A year-on-year analysis shows that Nigeria’s reserves have grown significantly over the past year.

On January 3, 2024, the reserves stood at $33.042bn, compared to $40.884bn on January 3, 2025.

This $7.842bn increase represents a 23.74 per cent growth, highlighting the government’s efforts to secure foreign capital and stabilise its external finances.

The substantial increase is attributed to a combination of factors, including the Eurobond proceeds, higher oil revenues, and the Central Bank’s strategic management of foreign exchange inflows.

The rise in FX reserves holds significant implications for the Nigerian economy. With higher reserves, the country is better equipped to meet external payment obligations, including debt servicing and import financing.

However, sustaining the upward trajectory in reserves presents challenges. The reliance on external borrowings, such as Eurobonds, raises concerns about the sustainability of Nigeria’s fiscal policies.

The rising debt profile, coupled with the cost of servicing these debts, could strain government revenues and limit fiscal flexibility.

The PUNCH also observed that the naira witnessed a notable recovery, appreciating by N125 against the dollar within a month following the implementation of the Electronic Foreign Exchange Matching System.

According to data from the CBN, the naira strengthened by eight per cent as the dollar was quoted at N1,535/$ on January 3, 2025, compared to N1,660/$ quoted on December 2, 2024, the official launch date of EFEMS trading.

The CBN first announced the EFEMS on October 3, 2024, as part of a series of reforms aimed at addressing speculation and enhancing transparency in Nigeria’s foreign exchange market.

This system was specifically designed for authorised dealers operating within the Nigerian Foreign Exchange Market and became operational on December 2, 2024, after a successful two-week trial period conducted in November.

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