Nigeria’s External Reserves Rise to $40.11bn, But Naira Stagnates Above N1500/$1, Raising Concerns

Nigeria’s external reserves have climbed to $40.11 billion as of July 2025, marking a significant milestone in the country’s ongoing effort to stabilize its foreign exchange market and rebuild confidence in its economy.

The Central Bank Governor, Yemi Cardoso, disclosed the development during the Monetary Policy Committee (MPC) briefing held on Monday, July 22.

Cardoso said the current level of reserves is enough to cover 9.5 months of imports, describing it as a strong rebound for the country’s foreign currency buffer. It is the highest level since November 2024 when the reserves reached $40.2 billion. The increase, he noted, was driven by a combination of improved crude oil production, rising non-oil exports, reduced imports, and renewed capital inflows into the Nigerian economy.

According to Cardoso, the foreign exchange market has also recorded signs of relative stability, attributed to sustained inflows and a tighter monetary policy stance aimed at curbing inflation and defending the naira. He maintained that the apex bank’s recent interventions, including interest rate hikes and policy adjustments, were beginning to yield results.

But despite the optimism painted by the rising reserves and improved market conditions, the naira has remained stubbornly above N1500 to the dollar. This has prompted growing skepticism over the effectiveness of the Central Bank’s strategies. Some economists ask: If reserves are indeed growing, why is the nairanot gaining strength?

For months, the naira has hovered above the N1500/$1 threshold on the official and parallel markets, a rate that many see as incompatible with the level of foreign reserves being reported. The gap between the macroeconomic fundamentals and the actual performance of the local currency has raised concerns about the sustainability of the capital inflows being recorded. Some analysts argue that the inflows may largely be short-term investments seeking high returns from Nigeria’s elevated interest rates, rather than long-term confidence in the economy.

However, the Central Bank insists that the outlook remains positive. Cardoso explained that inflation is projected to decline further in the coming months due to the tight monetary stance, expected stability in exchange rates, the downward movement in the price of petrol (PMS), and the onset of the harvest season, which should boost food supply and ease pressure on consumer prices.

The MPC briefing also noted that Nigeria’s current economic direction is supported by improvements in key sectors. Crude oil production has picked up following better security in the Niger Delta and renewed efforts to curb oil theft. Non-oil exports have also seen modest growth, particularly in agriculture and solid minerals. On the other hand, imports have reduced, driven partly by high exchange rates and the shift toward local substitutes, further helping to conserve foreign exchange.

The International Monetary Fund (IMF), in its latest projections, has backed the possibility of macroeconomic recovery. The Fund forecasts that Nigeria’s inflation will drop to 23 percent in 2025, and fall further to 18 percent in 2026, reflecting the anticipated effects of tight monetary policy and improved supply chains. On growth, the IMF projects that Nigeria’s GDP will expand by 3.3 percent this year, up from 2.9 percent in 2024. The expected recovery in the oil sector and advancements in agriculture are seen as the main drivers of this growth.

The Central Bank’s Monetary Policy Committee is expected to meet again on September 22 and 23 to assess the country’s economic conditions and determine the next steps in its monetary strategy.

But in the meantime, many Nigerians remain cautious. While the numbers presented suggest stability on paper, the lived reality of a weakened currency, stubborn inflation, and fragile purchasing power continues to erode public confidence in the proclaimed gains.