Nigeria’s foreign exchange reserves have climbed above the $54 billion mark, strengthening the country’s external position and providing additional buffers for the Central Bank of Nigeria (CBN) to manage pressure in the foreign exchange market.
The increase has also coincided with a period of relative stability in the naira, with the currency gaining ground in the official market over recent months.
But as reserves continue to rise, questions are emerging over the quality, composition and sustainability of the funds being accumulated.
The key issue is whether the increase is being driven predominantly by durable sources of foreign exchange, such as crude oil receipts, diaspora remittances and non-oil exports, or by portfolio inflows that can reverse quickly when global financial conditions or investor sentiment change.
President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwambe, said the rise in reserves is a positive development and reflects several improvements in Nigeria’s external accounts.
He identified higher crude oil prices, improved oil production, stronger diaspora remittances, non-oil export proceeds and changes in monetary and foreign exchange management as some of the factors supporting the accumulation.
Gwambe also pointed to reduced volatility in the Niger Delta and lower crude oil theft as factors that have helped improve production and, consequently, foreign exchange receipts.
He added that rising diaspora remittances through the official market have also supported the reserves, following reforms in the foreign exchange market.
Gwambe further cited higher non-oil export proceeds and improvements in fiscal and monetary management, including measures aimed at reducing foreign exchange hoarding, rent-seeking and arbitrage.
While oil receipts remain fundamental to Nigeria’s external position, market participants say portfolio investment has become an increasingly important source of foreign exchange.
Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said the rise in reserves reflects stronger confidence among foreign investors and the international business community.
He added that improved export performance was another important contributor.
According to Yusuf, economic reforms have improved foreign exchange liquidity while making Nigerian financial assets more attractive to international investors.
A CBN source, who requested anonymity, told Nairametrics that interest from foreign investors in Nigerian government securities has increased.
A former Access Bank Treasury official, who also asked not to be named, said it may be difficult to identify a single source responsible for the reserve accumulation.
Nigeria’s capital importation data provides some evidence of the renewed foreign investor interest.
The country attracted $10.37 billion in foreign capital in the first quarter of 2026, an 83.8% increase from $5.64 billion recorded in the corresponding period of 2025.
The banking industry attracted $7.55 billion, representing 72.8% of total capital imported during the quarter, while the financing sector received another $2.43 billion.
The concentration of inflows in financial services is significant because it suggests that a substantial portion of foreign capital entering Nigeria is financial rather than investment in productive capacity.
Nigeria also recorded a sharp increase in portfolio-related inflows in January, when foreign portfolio investment, or “hot money”, rose to $3.37 billion and accounted for 95.72% of total capital importation during the month.
This contrasts sharply with foreign direct investment, which remained below 4% of total capital imported into Nigeria in 2025.
The rise in reserves is undoubtedly positive, but the composition of the inflows matters.
Experts warned that portfolio investments can strengthen reserves and improve foreign exchange liquidity, but they are generally more sensitive to interest rates, exchange-rate expectations and global investor sentiment than longer-term foreign direct investment.
He noted that Nigeria’s improving trade position is therefore important. Sustained export growth would provide a more durable source of foreign exchange than short-term financial flows.
Gwambe said the major concern remains the gap between the official and parallel foreign exchange markets.
He called for greater integration of Bureaux De Change operators into the formal foreign exchange ecosystem and increased participation in the market.
The rise in reserves gives the CBN a stronger buffer and potentially greater capacity to respond to foreign exchange shocks. But reserves alone cannot guarantee long-term naira stability.
The bigger test is whether Nigeria can convert the current improvement in foreign exchange liquidity into stable, diversified and recurring foreign exchange earnings.
The experts noted that if the buildup is increasingly supported by crude receipts, remittances, exports and long-term investment, the reserves could represent a meaningful strengthening of Nigeria’s external position.
