Nigeria’s strengthening foreign exchange reserves are generating positive spillover effects across financial markets, with the naira, equities, and bond markets experiencing renewed investor confidence and improved performance metrics.
Central Bank of Nigeria data reveals foreign currency reserves climbed to $41.07 billion on August 21, 2025, representing a 5.46 percent increase from $38.94 billion recorded in August 2022. This growth trajectory follows the appointment of Olayemi Cardoso as CBN governor in September 2023, with reserves reaching sustained levels above $40 billion for the first time since late 2021.
The improved reserve position has catalyzed significant foreign portfolio investment flows into Nigerian markets. Foreign portfolio inflows into equities accounted for 29.2 percent of total market activity in the first half of 2025, substantially higher than 20.4 percent in the corresponding period of 2024. This represents a 273 percent increase in foreign transaction volumes, rising from N145.08 billion to N540.48 billion.
“We expect renewed momentum in foreign portfolio investment activities to continue throughout 2025, supported by Nigeria’s improving macro narrative, especially enhanced FX liquidity and declining inflation,” stated analysts at CardinalStone in their outlook report.
The Nigerian Exchange Limited All Share Index demonstrated strong performance, closing 2024 with 37.65 percent annual growth following 46 percent growth in 2023, significantly outperforming the 20 percent recorded in 2022.
Enhanced reserve levels have strengthened the CBN’s capacity to defend the naira, reducing devaluation fears and anchoring inflation expectations. Commercial banks have resumed international transactions using naira-denominated cards, with GTBank setting its FX rate at N1,545 per dollar, matching parallel market rates.
“At current reserve levels, naira depreciation risk is minimal,” explained Ayodele Akinwunmi, chief economist at United Capital. “Currency stability or appreciation in coming weeks will increase foreign investor appetite for Nigerian equity and bond markets.”
The stronger reserve position particularly benefits Nigeria’s Eurobond market, with average yields declining 20 basis points to 7.78 percent, levels not seen in three years. At compressed yield levels around seven percent, Nigeria can issue debt at lower costs than regional peers including Ivory Coast, Benin Republic, and South Africa.
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