Stability Keep Reserves at $41bn

Oluchi Chibuzor

Nigeria’s foreign reserves hit $40.72 billion on August 13, 2025. The increase in reserves was driven largely by rising forex inflows and marginal increase in crude oil output. According to the latest figures published on the Central Bank of Nigeria (CBN) website, the gross reserves moving average stood at $39.3 billion on August 1, and reached $39.5 billion on August 6, and hit $40.2 billion on August 8 before the present milestone. The sustained reserves accretion, decline in inflation rate, commodities prices dip as well as long-term naira stability are all positive fallout of the ongoing economic reforms instituted by the federal government.

The stability being witnessed in the economy comes with multiple benefits to businesses, households and the overall economy.

One of the biggest beneficiaries is the foreign reserves, which have stayed above $40 billion for nearly two weeks. The gross reserves closed at $40.72 billion on August 13, with capacity to cover over 10 months imports for the economy.

The moving average of the gross reserves showed $39.3 billion position on August 1, reached $39.5 billion on August 6, grew to $40.2 billion on August 8. By August 11, the gross reserves stood at $40.65 billion before hitting $40.72 billion on August 13.

Aside the reserves, the naira has also seen sustained stability while the inflation rate has continued to decline, closing July at 21.88 per cent.

The July figure represents the fourth consecutive month of decline, compared with 22.22 per cent posted in June, according to figures from the National Bureau of Statistics (NBS).

The latest Consumer Price Index report showed that the July figure was 0.34 percentage points lower than the June rate and 11.52 percentage points below the 33.40 per cent recorded in July 2024.

The NBS said, “The Consumer Price Index rose to 125.9 in July 2025, reflecting a 2.5-point increase from the preceding month (123.4). In July 2025, the headline inflation rate eased to 21.88 per cent relative to the June 2025 headline inflation rate of 22.22 per cent”.

On economic stability, the Director-General of the World Trade Organisation (WTO), Dr. Ngozi Okonjo-Iweala, recently attested that economic reforms instituted by the Federal Government have helped to stabilize the economy.

Dr. Okonjo-Iweala said: “We think that the President and his team have worked hard to stabilise the economy, and you cannot improve an economy unless it’s stable. “So, he has to be given the credit for the stability of the economy. The reforms have been in the right direction.

“What is needed next is growth. We now need to grow the economy, and we need to put in social safety nets so that people who are feeling the pinch of the reforms can also have some support to weather the hardship.”

Oil output rises

Nigeria’s oil output rose 0.67 per cent in July to 1.51 million barrel per day (mbpd), meeting OPEC+’s 1.5 mbpd quota for the third time this year. Although, production still falls below the 2025 benchmark target of 2.06 mbpd, a slight increase is anticipated in August, and higher contributions to the reserves are expected.

Part of the reserves accretion was triggered by the FX reforms, instituted by the Olayemi Cardoso-led Central Bank of Nigeria (CBN), new policies instituted by the Federal Government to boost local production, reduce forex demand pressure, and lessen domestic prices have been instrumental to macroeconomic stability.The expectations are that the apex bank sustains the forex reforms while the fiscal authority strengthens efforts at enhancing FX earnings, especially from gas, oil and non-oil exports.

The CBN under Cardoso is cultivating multiple FX sources to increase dollar inflows, boost dollar access to manufacturers and retail end users.

From moves to improve diaspora remittances through new product development, the granting licenses to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorized dealers and other players in the value chain.

The move has led to substantial accretion to the gross FX reserves and supported the stability of the naira.

Given that FX inflows to the economy are strategic in achieving monetary and fiscal policy stability, the CBN under Cardoso puts in a lot of efforts in attracting more inflows into the economy.

Diaspora remittances to Nigeria, estimated at $23 billion annually remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.

The CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.

The remittances in the economy is expected to increase based on  CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth.

Average cost of living has continued to improve as stability in the foreign exchange (forex) market, improved agricultural productivity and security reduced inflationary pressure for the fourth consecutive period.

Economic and finance firms including Financial Derivatives Company (FDC), Coronation Group, Arthur Steven Asset Management, Cordros Capital Group and HighCap Securities among others cited improved macroeconomic stability as a major driver of continuing decline in average costs of goods and services.

Most analysts expected the disinflation trend to continue in the period ahead, a situation that could lead to the first cut in benchmark interest rate by the CBN

Experts however identified possible spike in demand for forex, flood forecast, security challenges and decline in global crude oil price as downside risks that could undermine the disinflationary trend.

Bismarck Rewane’s FDC had projected inflation rate to drop by 88 basis points to 21.34 per cent in July 2025, citing a boost in food production and stability in the forex market.

According to FDC, the decline in headline inflation broadly reflected a reduction in basic food items such as tomatoes, yams, beans, onions, pepper and garri among others.

FDC expected all inflation sub-indices to fall “in line with the ongoing price moderation momentum”, underlining a broad decline in inflationary pressure, rather than a narrow base.

“During our survey in July, we noticed that the prices of most essential commodities declined. Meanwhile, 68.57 per cent of items remained stable, including rice, wheat flour, semovita, eggs, Irish potatoes, basmati rice, and vegetable oil. Notably, several import-dependent staples, such as titus fish, basmati rice, and beverages, maintained price stability,” FDC stated.

“With the commencement of the harvest season, we expect a further decline in commodity prices in the coming months. This should help ease inflationary pressures arising from increased liquidity due to higher FAAC allocations. The major risk to our projections remains security challenges in the food-producing states, falling oil prices and the hike in PMS price,” FDC stated.

Coronation Group expected headline inflation rate to drop by about 70 basis points to 21.52 per cent in July 2025.

Analysts at Coronation Group identified four key factors driving down inflation, including the passthrough effect of the CBN’s foreign exchange (forex) policy reforms which has continued to support naira stability, decline in domestic energy costs, decline in some farm produce prices on the back of early harvests and favourable base effects.

“The inflation outlook for August points to a potential moderation, supported by continued foreign exchange stability and a slight easing in food prices from the ongoing early harvest season. If the current forex stability persists and early harvest gains are sustained, headline inflation could remain broadly in line with July’s level.

“However, risks to this outlook include a sharp depreciation of the naira from external shocks, an increase in fuel prices from potential global geo-political risks, and upward pressure on food prices stemming from recent flooding in Nigeria, which has impacted farmlands and disrupted transportational nodes needed for logistics. These factors could reverse the current disinflationary trend and move inflation above 22 per cent or limit the pace of moderation relative to the previous month,” Coronation Group stated.

Analysts at Cordros Capital Group said disinflation and improved macroeconomic stability as noticed in improvements in oil production, a relatively stable currency and better financial conditions, could stimulate stronger economic activity.

“Food inflation is expected to moderate in July, driven by the improved supply of seasonal farm produce, such as green maize, groundnuts, pumpkins, and vegetables, from the early green harvest. This increased availability is likely to ease price pressures on domestically produced food items, particularly in the southern and middle-belt regions”.

“Nonetheless, persistent insecurity in key food-producing zones in the North continues to disrupt farming and transportation, keeping the broader food supply tight. Imported food inflation may also decelerate, supported by the relative stability of the naira. The reduced exchange rate volatility is expected to lower import costs for processed and packaged food products, helping to contain price increases in that segment,” Cordros Capital stated.

Analysts at Arthur Steven Asset Management stated that prices could continue to fall due to lower energy costs and stability in the forex market.

HighCap Securities noted that reduced currency volatility, improved food supply and logistics cost were perfect combination for continued decline in inflation rate.

With improvement in exchange rate, comes reduced cost for import. The naira appreciated significantly last week, strengthening from N1,580 to N1,530 per dollar, a gain of about 3.25 per cent at the parallel markets. The local currency exchanged at N1,536 per dollar at the official markets, creating N6 per dollar rate gaps between both markets.

Importation costs in Nigeria include various taxes and charges, primarily import duties, VAT, and other levies. These costs are calculated based on the CIF value (Cost, Insurance, and Freight) of the goods, which includes the cost of the goods, insurance, and shipping.

The cost, insurance and freight (CIF) price is the price of a good delivered at the frontier of the importing country, or the price of a service delivered to a resident, before the payment of any import duties or other taxes on imports or trade and transport margins within the country.

Changes in exchange rate can significantly impact the cost of imports, as duties and other charges are often calculated based on the prevailing exchange rate.

Nigeria’s total Imports in 2024 were valued at $40.97 billion, according to the United Nations COMTRADE database on international trade. Nigeria’s main import partners were: China, Belgium and India.

New figures from the National Bureau of Statistics (NBS) reveal that Nigerian imported food and beverages worth N1.67 trillion ($1 billion) during the first quarter of 2025 (January–March), reflecting a five per cent increase from the N1.59 trillion recorded over the same period in 2024.

Analysts from Cordros Securities said the naira appreciation helped cushion the impact of the spike in imported fuel prices triggered by tensions in the Middle East.

“We expect FX liquidity to remain robust, supported by reduced global pressures and stronger market confidence, which continues to attract inflows from foreign portfolio investors (FPIs). Additionally, a stronger net FX reserve position enhances the CBN’s capacity to intervene when necessary. Barring any unexpected shocks, we anticipate that the naira will remain stable in the near term,” they said

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