Nigeria’s external reserves have risen to $41.046 billion, the highest level in nearly four years, sparking optimism among economists and financial market watchers.....KINDLY READ THE FULL STORY HERE▶

According to Nivo News, Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), said the buildup in reserves will strengthen the naira, stabilize the economy, and boost investor confidence. He noted that healthy reserves also enhance Nigeria’s capacity to meet external financial obligations and reduce inflationary pressures.

“When reserves are robust, the currency gains strength and the economy becomes more stable,” Yusuf explained. “It signals to both domestic and foreign investors that the economy is healthy and conducive for business. If the exchange rate holds steady, inflation is also likely to ease. This is a very positive development, showing that recent reforms are starting to produce tangible results.”

Central Bank of Nigeria (CBN) data show that while reserves have grown by only 0.39 percent year-to-date—rising from $40.88 billion on January 2 to $41.04 billion on August 20—much of the buildup occurred in August. Within 20 days, reserves climbed by $1.5 billion, or 3.8 percent, from $39.54 billion at the start of the month.

Financial experts attribute the improvement to reforms in Nigeria’s foreign exchange market. Ayokunle Olubunmi, Head of Financial Institutions Ratings at Agusto & Co, highlighted the unification of exchange rates, clearance of over $7 billion in forex backlogs, and the introduction of the Nigeria FX Code as measures that have restored confidence.

CBN Governor Olayemi Cardoso also expressed optimism, noting that the reforms are yielding results. “We have done what we should do—acting as a catalyst to make this happen. And it is happening. The numbers are showing it,” he said at the last Monetary Policy Committee meeting.

Analysts further point to elevated treasury yields, regular open market operations, stronger crude oil prices, and improved production volumes as factors driving foreign exchange inflows. A mid-year economic outlook by CardinalStone projected that reserves could exceed $41 billion by year-end, supported by plans to secure $3.2 billion in external borrowings and continued portfolio inflows.

Meanwhile, the naira recorded a slight appreciation at the Nigerian Foreign Exchange Market (NFEM), closing at ₦1,535.78 to the dollar on Thursday, compared to ₦1,536.73 on Wednesday. The currency remained stable in the parallel market, trading between ₦1,545 and ₦1,550 per dollar.

Analysts at FBNQuest Merchant Bank, however, cautioned that heavy reliance on foreign portfolio investments poses risks. “The sustained dominance of portfolio inflows as a key source of forex supply underscores Nigeria’s dependence on short-term capital to maintain liquidity. While this offers immediate relief, it leaves the market vulnerable,” the firm warned.