How CBN is Leveraging Reserves to Provide over 10-month Import Cover

The Central Bank of Nigeria (CBN) has disclosed that at $46.7 billion, the foreign reserves have the capacity to provide over 10-month of import cover for the economy. The reserves also signal significant boost to the foreign currency buffer for the country. With the drop in inflation rate to 16.05 per cent in October, the economic indicators have the potential to lift businesses and provide more buffer for sustainable economic growth. Precious Ugwuzor writes

Nigeria has continued to witness significant improvement in macroeconomic indicators as seen in the rise moderation in inflation rate and growth in foreign reserves.

These macroeconomic advantages include the progressive narrowing of the gap between the official and parallel market rates as well as positive balance of payments.

Nigeria’s foreign reserves have climbed to $46.7 billion, the highest level since 2018, driven by renewed investor confidence, improved oil receipts and stronger balance-of-payments inflows, the Central Bank of Nigeria said.

The reserves position, which represents over 10 months of import cover, signals a significant boost to country’s foreign currency buffer.

CBN Governor, Olayemi Cardoso, represented by the Deputy Governor in charge of Economic Policy, Dr Muhammad Abdullahi, disclosed this in Abuja at the 20th Anniversary of the Monetary Policy Department (MPD).

Cardoso said the latest reserve position, recorded on November 14, 2025, provides 10.3 months of import cover, describing it as a major milestone in the Bank’s reform programme. “Foreign reserves have risen to $46.7 billion, supported by sustained inflows and renewed investor participation across various asset classes,” he said.

He linked the sharp rise to stronger portfolio inflows, improved oil receipts, and policies that have stabilised the foreign exchange market. According to him, the naira has continued to firm up, while the spread between the official and Bureau-de-Change segments has narrowed to below two per cent — a development he said reflects restored confidence.

Cardoso noted that inflationary pressures were also easing. Headline inflation slowed to 16.05% in October 2025, down from 34.6% in November 2024. He described the decline as “seven consecutive months of disinflation” and “the lowest in three years”, adding that core inflation had also begun to soften.

Already, the National Bureau of Statistics (NBS) said that in October 2025, Inflation reduced to 16.05 per cent from 18.02 per cent in September 2025. This was contained in the Consumer Price Index (CPI) Report of October.

NBS said, “In October 2025, the Headline inflation rate eased to 16.05% relative to the September 2025 headline inflation rate of 18.02%.”

On a year-on-year basis, NBS said the Headline inflation rate was 17.82 per cent lower than the rate recorded in October 2024 (33.88 per cent).

The report said this shows that the Headline inflation rate (year-on-year basis) decreased in October 2025 compared to the same month in the preceding year (i.e., October 2024), though with a different base year, November 2009 = 100.

NBS added, “On a month-on-month basis, the Headline inflation rate in October 2025 was 0.93%, which was 0.21% higher than the rate recorded in September 2025 (0.72%).

“This means that in October 2025, the rate of increase in the average price level was higher than the rate of increase in the average price level in September 2025.”

The ongoing moderation in inflation rate, rising competitiveness of the naira and growth in foreign reserves all point to a positive phase in Nigeria’s economic position.

The International Monetary Fund (IMF) relied on these indicators to project a 3.9 per cent growth for Nigeria in 2025 as well as expanded stability in the FX markets.

The FX reforms, instituted by the 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.

CBN Governor explained that the rise in foreign reserve marked a significant rebound in Nigeria’s foreign currency buffers amid ongoing efforts to stabilize the exchange rate and rebuild investor confidence. The reserves spike happened despite relatively stronger CBN market intervention this year and external debt servicing as well as weak oil receipts.

Looking ahead, the analysts expect robust FX liquidity from both foreign and local sources, driven by strong market confidence, to continue supporting naira stability in the near term.

Looking ahead, analysts expect headline inflation to ease further in July, supported by a moderation in both food and core inflation components.

“Specifically, we anticipate the slowdown in food prices to be supported by improved market supply from early green harvests and the relative stability of the naira, which is expected to reduce pressure on imported food prices. Similarly, core inflation is projected to remain broadly stable, supported by a reduced exchange rate pass-through effect and steady energy prices,” they said.

Multiple FX sources activated

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.

Director of Trading at Verto, Charlie Bird, said dollar liquidity dynamic is now more balanced, with foreign investors and airlines able to repatriate funds.

Speaking during Cordros Asset Management seminar titled: “The Naira Playbook”, he said Nigeria is now darling of foreign investors because of improved dollar liquidity in the economy due to positive CBN’s reforms.

As naira rallies, import costs to dip

Import costs have been tipped to drop significantly as the naira continues to gain more ground across 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.

While Nigeria is making strides toward fuel self-sufficiency, it still relies on imports, as seen in the reduced import bill for the first quarter. This indicates a decline in fuel imports but not a complete elimination.

Already, trade tensions have softened from the tariff hike announcements in April. The US President paused the implementation of reciprocal tariffs, allowing countries to negotiate lower tariffs for 90 days, which was recently extended to August 1.

What other stakeholders are saying

The Director-General, the West African Institute for Financial and Economic Management (WAIFEM) Dr. Baba Musa, called on government to ensure that 3.9 per cent growth for Nigeria in 2025 translate to decent jobs, rising incomes, improved productivity, and broader social welfare.

In a report titled: “Nigeria’s Economic Outlook at a Turning Point”, he saidas Nigeria moves further into 2025, Nigeria’s economic story is one of resilience, renewal, and strategic recalibration.

Musa, who is also the President, Nigerian Economic Society, said Nigeria’s economic trajectory is increasingly encouraging with the International Monetary Fund (IMF) projecting real Gross Domestic Product (GDP) growth of 3.9 per cent in 2025, up from 3.5 per cent in 2024, with further acceleration to 4.2 per cent in 2026.

Musa saidNigeria in 2025 is at a critical inflection point, cautiously optimistic yet structurally fragile.

“Gains in growth, inflation moderation, and investment confidence mark important progress, but the work is far from complete. To sustain the recovery, Nigeria must maintain macroeconomic stability, deepen structural reforms, and ensure that growth translates into tangible improvements for citizens. Achieving this requires collaboration among government, private sector, civil society, and development partners,” he said.

According to him, by committing to policy consistency, human capital investment, and inclusive growth, Nigeria can consolidate its recovery and emerge as a more competitive, resilient, and equitable economy in the years ahead.

“Globally, economies are grappling with slowing growth, projected at 2.7% in 2025 by the IMF for advanced economies, and heightened geopolitical risks that affect trade and investment. Against this backdrop, Nigeria has demonstrated remarkable determination. Domestically, inflationary pressures, infrastructure deficits, and unemployment persist, yet they now represent policy frontiers rather than defining constraints,” he said.

Musa said recent policy measures, ranging from fiscal consolidation to targeted monetary adjustments, have laid the groundwork for a sustainable growth trajectory.

“The real test, however, lies not only in achieving stability but in ensuring that it translates into tangible socio-economic outcomes: decent jobs, rising incomes, improved productivity, and broader social welfare. If Nigeria deepens reforms, invests strategically in human capital, and leverages its structural advantages, the country can achieve not only recovery but inclusive and durable economic transformation,” he said.