At $46.01bn, Nigeria’s Foreign Reserves Hit Highest Peak Since 2018, Strengthen FX Buffers

*•Banks’ credit to the private sector drops by 2.8% to N75.8tn

Kayode Tokede

Nigeria’s external reserves have climbed to $46.01 billion, the highest level recorded since March 2018, signalling a strengthening of the country’s foreign exchange buffers amid ongoing macroeconomic reforms.This is just as banks’ credit to Nigeria’s private sector declined by 2.8 per cent, or N2.2 trillion, year-on-year to N75.8 trillion in 2025, following the Central Bank of Nigeria’s (CBN) sustained monetary tightening.

Latest data published in the CBN’s Movement in Reserves report showed that the foreign reserves stood at $46.01 billion as of January 22, 2026, crossing the $46 billion threshold for the first time in nearly eight years.The increase represents a $406.25 million or 1.12 per cent gain in 2026, from $45.5 billion at the close of 2025.As gathered by THISDAY, Nigeria’s foreign reserves had already recorded a strong rebound in 2025, rising by $4.62 billion or 11.3 per cent from $40.88 billion in 2024 to $45.5 billion at year-end, despite volatility in the global crude oil market.

According to data from the Organisation of Petroleum Exporting Countries (OPEC), crude oil prices stood at $63.21 per barrel as of January 22, 2026, up from $61.01 at the close of 2025. The current price is marginally below the 2026 budget benchmark of $64–$64.85 per barrel.

Crude oil remains Nigeria’s dominant source of foreign exchange, accounting for about 90 per cent of forex earnings.Analysts have attributed the steady rise in external reserves to a combination of improved crude oil output, enhanced macroeconomic stability, and rising foreign-exchange inflows from autonomous sources.Other contributing factors include external borrowings by the federal government, received in foreign currency, and a sharp decline in fuel imports following domestic refining improvements, which have eased pressure on the foreign exchange market and the nation’s reserves.

Vice Chairman of Highcap Securities Limited, Mr. David Adnori, said the recent build-up in reserves reflected structural improvements in Nigeria’s economic management, particularly in the oil and gas sector.“Several factors have been responsible for this development,” Adnori said.“First is the fact that our oil output has improved significantly from what it used to be, and crude oil and gas continue to dominate our foreign exchange earnings.”

He also pointed to improved governance at the Nigerian National Petroleum Company Limited (NNPCL).“Secondly, we now have a much better-managed NNPCL. There is greater sanity and transparency in the system, and that has played a role,” he said.Adnori added that rising investor confidence, driven by broader macroeconomic reforms, has boosted foreign exchange inflows from autonomous sources.

Banks’ Credit to Private Sector Drops by 2.8% to N75.8tn

Meanwhile, banks’ credit to Nigeria’s private sector declined by 2.8 per cent, or N2.2 trillion, year-on-year, to N75.8 trillion in 2025, according to CBN’s official data.The figure represents a drop from N78.02 trillion recorded in December 2024, reflecting the impact of high interest rates and restricted liquidity in the financial system.

Credit to the private sector, comprising loans, trade credits, and other receivables, remains a key indicator of banking sector resilience and its contribution to national economic growth.In 2025, the CBN deliberately tightened liquidity conditions to curb inflation and stabilise the naira in the foreign exchange market. As part of the strategy, the apex bank maintained a hawkish monetary stance for most of the year.

Between February and July 2025, the Monetary Policy Committee (MPC) retained the Monetary Policy Rate (MPR) at 27.50 per cent, citing persistent inflationary pressures and fragile macroeconomic conditions.In September 2025, the MPC reduced the policy rate by 50 basis points to 27.00 per cent, marking the first rate cut since 2020. The committee, however, maintained the rate at 27.00 per cent at its November 2025 meeting, keeping borrowing costs elevated through the year-end.

According to the CBN’s Money and Credit Statistics, private sector credit reached a high of N78.07 trillion in April 2025. It fell to N74.4 trillion in October 2025, as the apex bank introduced measures to guide banks’ lending toward the real sector.Analysts attributed the 2025 decline largely to the CBN’s tight monetary stance, elevated interest rates, high inflation, and global economic uncertainty.

Despite the contraction, analysts expressed optimism that private sector lending could recover in 2026, supported by clearer monetary policy direction and improving macroeconomic conditions.CBN data showed that bank credit to the private sector rose sharply to N78.02 trillion in 2024, a 124.8 per cent increase of N15.48 trillion from N62.54 trillion in 2023.

Analysts at Cordros Capital said the trend in private sector credit could improve in the period ahead.“We believe the reinforcement of the CBN’s limit on Deposit Money Banks’ loans-to-deposits macro-prudential ratio will continue to drive the willingness of commercial banks to create risky assets over the short to medium term,” Cordros Capital said.A study published by the CBN also concluded that credit was growth-enhancing, even in environments characterised by weak trade openness, tight monetary policy, poor investment climate, and infrastructure deficits.