Nigeria’s foreign exchange (FX) reserves have declined by $400 million in August, according to the latest data released by the Central Bank of Nigeria (CBN). The reserves, which stood at $34.1 billion in July, dropped to $33.7 billion by the end of August.
The fall comes amid sustained pressure on the naira, rising import bills, and external debt repayments. Analysts say the decline reflects the continued challenge of maintaining a stable currency while balancing Nigeria’s external obligations.
Despite recent policy interventions, including adjustments to interest rates and tighter liquidity management, the naira remains under pressure in both official and parallel markets. Importers continue to struggle with accessing foreign exchange, while speculative demand has further weakened confidence.
According to financial experts, the $400 million dip is partly linked to external debt servicing payments due in August and increased withdrawals by government agencies to fund capital projects. Additionally, global crude oil prices softened slightly during the period, affecting Nigeria’s oil earnings.
Oil remains the country’s primary source of foreign exchange, but declining production levels have limited its impact. Nigeria has struggled to consistently meet its OPEC quota, largely due to pipeline vandalism, oil theft, and underinvestment in infrastructure.
For Nigeria’s economy, shrinking reserves pose risks on multiple fronts. They reduce the CBN’s ability to defend the naira, potentially fueling further currency depreciation. They also raise concerns about the country’s ability to meet external debt obligations without resorting to more borrowing.
However, the government insists the situation is under control. Officials highlight ongoing efforts to attract foreign direct investment, improve non-oil exports, and strengthen diaspora remittances as alternative sources of forex inflows.
Economists warn that unless Nigeria accelerates structural reforms in its energy, manufacturing, and agricultural sectors, reliance on volatile oil revenues will continue to strain reserves.
Key implications of the decline:
Possible further weakness in the naira exchange rate.
Higher import costs, fueling inflationary pressures.
Limited fiscal space for government projects reliant on external borrowing.
In the short term, much depends on global oil price trends and Nigeria’s ability to raise production. In the long term, diversifying the economy remains critical to ensuring sustainable forex inflows.
