Nigeria's External Reserves Experience Modest Yet Significant Growth in January 2026
Nigeria's external reserves recorded a notable increase at the close of January 2026, rising by $66 million to reach $46.11 billion, according to the latest data released by the Central Bank of Nigeria (CBN). This represents a 1.6 per cent month-on-month gain from the $45.45 billion recorded in December 2025, providing renewed support for the country's foreign exchange buffers after months of pressure driven by global volatility and heightened domestic demand for foreign currency.
Strengthening Naira Reflects Improved Market Confidence and Policy Reforms
The improvement in external reserves coincides with a period where the naira is enjoying its strongest performance in nearly two years, reinforcing market confidence that recent reforms and tighter monetary policies are beginning to yield tangible results. At the official Nigerian Foreign Exchange Market (NFEM), the currency appreciated by 3.5 per cent month-on-month to close January at N1,390.50 to the dollar, marking its strongest level in almost two years.
Similarly, the parallel market reflected improved sentiment, with the naira gaining 1.3 per cent to trade around N1,460 per dollar. Market analysts attribute this rally to enhanced dollar liquidity, softer global dollar dynamics, and more active interventions by the Central Bank of Nigeria.
Oil Price Surge Provides Timely Boost to Foreign Exchange Inflows
Analysts point to firmer global crude oil prices as a primary driver behind the uptick in reserves. Brent crude averaged $69.8 per barrel in January, representing a substantial 12.7 per cent increase from December and its strongest level in several months. This price rally was supported by heightened geopolitical tensions in the Middle East, renewed supply risks, and OPEC+'s decision to pause planned production increases.
For Nigeria, where crude oil accounts for the bulk of export earnings, higher oil prices typically translate into improved foreign exchange inflows and stronger reserve positions, providing a crucial buffer for the economy.
Capital Inflows and External Borrowings Contribute to Reserve Accumulation
Beyond the impact of oil revenues, intermittent portfolio inflows also played a role in reserve accumulation, as foreign investors showed renewed interest in Nigerian fixed-income assets. This follows adjustments to the country's foreign exchange framework, higher interest rates, and tighter monetary conditions that have improved yields and reduced uncertainty around foreign exchange pricing.
Proceeds from select sovereign and corporate external borrowings further bolstered reserves, while elevated remittance inflows recorded in December may have had residual positive effects. However, analysts note that the exact contribution of each factor is difficult to isolate with precision.
Reforms and Tight Liquidity Conditions Restore Investor Confidence
Reforms introduced over the past year, including greater transparency at the official foreign exchange window and efforts to clear outstanding foreign exchange backlogs, have helped restore investor confidence and reduce speculative demand. Additionally, tighter domestic liquidity conditions have constrained arbitrage activity, supporting short-term currency stability.
Analysts observe that relatively comfortable reserve levels have enhanced the Central Bank of Nigeria's capacity to intervene when necessary, even as structural challenges persist in the broader economic landscape.
Persistent Risks Despite Short-Term Relief and Cautious Optimism
Despite the improvement witnessed in January, Nigeria's external reserves remain exposed to oil price swings and shifts in global risk sentiment. Production constraints, security challenges in the Niger Delta, and uncertainty around sustained foreign inflows continue to pose significant downside risks.
Nevertheless, research firms maintain a cautiously optimistic outlook. Cordros Research expects the naira to remain broadly stable in the near term, citing a weaker dollar, sustained current account surplus, and elevated yields that should support continued capital inflows. Afrinvest Research also noted that ongoing reforms and tight liquidity conditions have curtailed speculative activity, helping to anchor near-term foreign exchange stability.
The broader global context has been favorable, with the US dollar falling to its lowest level in four years, creating opportunities for the naira and other global currencies to appreciate. This shift has prompted investors to move funds into traditional safe havens such as gold, the euro, and the Swiss franc, further influencing currency dynamics in emerging markets like Nigeria.
