External Reserves Could Hit $41bn By Year-end – Analysts

Nigeria’s external reserves are projected to reach $41 billion by the end of 2025, if the current strengthening of the naira against the dollar persists, according to economic experts and recent market analyses.

This forecast comes amid rising FX inflows and tightening monetary policies aimed at stabilising the currency and curbing inflation.

This is as the value of the naira closed stronger at the official window as it moved closer to selling at N1,500 while it paused its depreciation at the parallel market on Wednesday.

At the close of business on Wednesday, the naira closed stronger at N1,520.74 to the dollar compared to N1,529.22 which it sold on Tuesday. This is a N8.48 or 0.55 per cent single day appreciation.

The value of the naira had declined at the official window on Tuesday from N1,528.33 which it sold on Monday before the appreciation recorded yesterday.

Meanwhile at the parallel market, the value of the naira closed on Wednesday stable at N1,560 to the dollar, same as what it closed at on Tuesday. The naira had depreciated on Tuesday having sold at N1,560 compared to N1,550 which it closed on Monday.Analysts attribute the expected growth in reserves to increased foreign portfolio investments and improved fiscal management, which have bolstered Nigeria’s external reserves significantly in recent months.

However, the expected appreciation of the foreign exchange would be marginally higher than what was recorded in 2024,

Analysts at CardinalStone in their mid-year outlook attributed the rise in the FX reserves  to plans by the federal government to raise a combined $3.2 billion in the second half of the year to meet some of its fiscal priorities. Likely inflows from portfolio investors are expected to also support this projection.

“These proposed external borrowings, alongside other anticipated inflows, will likely boost the FX reserves to $41.00 billion by year-end, compared to $37.27 billion as of H1’25,” the Lagos-based research and investment firm said in its report.

Larger external reserves bode well for the naira as the research firm sees the local currency maintaining the N1,550.00 — N1,635.00/$ bandwidth through the end of 2025.

Nigeria’s FX reserves have shed more than $3.5 billion year-to-date as the central bank paid off some $2 billion in external borrowings while regularly selling dollars to the market to ensure liquidity and naira stability amid global tensions.

According to analysts at CardinalSone Research, external shocks – both the tension in the Middle East and sweeping tariffs powered by US President Donald Trump – have led to FX outflows of $22.83 billion, as some investors shifted capital to the U.S. Treasuries and Gold.

This has seen the apex bank adopt a “discretionary FX framework”, selling a total sum of $4.72 billion in the presence of perceived market distortions.

CardinalStone stated that the CBN’s average monthly FX intervention came in at $786.58 million, materially lower than the $2.30 billion pre-COVID and $1.38 billion post-COVID levels previously used to defend the Naira at unsustainable levels, despite underlying macro weaknesses.

In a bid to tame inflation, lure in foreign capital and shore up the value of the naira, the monetary authorities have left key benchmark interest rates unchanged for two straight times after aggressively hiking lending rates by a cumulative 875 basis points to 27.5 percent.

The analysts see a headroom for a 50 to 100 basis points before the year ends, bringing relief to business owners grappling with high borrowing rates.

The combination of tighter monetary policy, rising external reserves, and improved FX management is helping to restore investor confidence, which had waned amid past currency instability.

However, the outlook remains sensitive to global oil prices, portfolio flows, and the pace of fiscal consolidation. Any shocks in these areas could pose downside risks to both reserves and currency stability.