Nigeria experienced a significant drop in gross foreign exchange reserves, which decreased by $2.57 billion or 6.29 percent between January and March 2025, according to data from the Central Bank of Nigeria.
The decline in reserves has been attributed to the pressures of foreign debt servicing, as highlighted by the Central Bank. Starting the year with reserves at approximately $40.88 billion, the total fell to $39.72 billion by January’s close.
Further reductions were observed in February, where reserves declined to $38.42 billion—a drop of $1.3 billion within the month, equating to a 3.27 percent decrease. The trend continued into March, with reserves dropping to $38.31 billion, marking an additional $110 million reduction or 0.29 percent from the previous month.
The cumulative impact of these monthly declines resulted in a total quarterly decrease of $2.57 billion, underscoring the challenges faced by Nigeria in maintaining foreign exchange stability amid necessary debt obligations.
Despite the robust reserves position at the close of 2024, the first quarter of 2025 has highlighted vulnerabilities, driven largely by substantial payments on foreign debts. The Central Bank acknowledged that the early quarterly figures reflect seasonal and transitional adjustments, including significant interest payments which have exerted consistent pressure on the reserve levels.
In an official statement, the Central Bank remarked, “While first-quarter figures showed some seasonal fluctuations and were impacted by foreign-denominated debt payments, we remain optimistic that reserves will continue to strengthen in the second quarter.”
Data indicates that Nigeria’s total foreign debt service payments reached $540 million in January and reduced to $276 million in February, leading to a total of $816 million spent on servicing foreign debts within the first two months of the year.
The large outflow in January was primarily due to scheduled repayments, significantly straining reserves. Although the reduction in February’s payments offered some relief, substantial debt responsibilities persist.
Looking forward, the Central Bank remains hopeful about a rebound in reserve levels, attributing potential improvements to rising oil production and anticipated growth in non-oil foreign exchange earnings. The bank is committed to prudent reserve management and effective macroeconomic policies aimed at stabilizing the naira, attracting investment, and fostering long-term economic resilience.
