The Central Bank of Nigeria (CBN) has attributed the decline in the country’s foreign exchange reserves by $2.57 billion in the first quarter of 2025 to the financial strain of servicing foreign debts. This decrease represents a 6.29% drop from January to March 2025, with reserves falling from $40.88 billion to $38.31 billion over the period.
The CBN noted that significant interest payments on foreign-denominated debt were a major factor in the decline. In the first two months of 2025, Nigeria spent $816 million on foreign debt servicing, with $540 million paid in January and $276 million in February. These payments exerted substantial pressure on the country’s FX reserves, despite an otherwise strong position at the end of 2024.
Despite the challenges faced in the first quarter, the CBN remains optimistic about a rebound in reserve levels. The bank anticipates improvements as oil production increases and non-oil foreign exchange earnings rise, which are expected to boost reserves in the second quarter of 2025. The CBN’s efforts to stabilize the FX market include injecting liquidity, such as the recent $197.71 million injection, to maintain market stability and confidence.
This situation highlights the ongoing challenges Nigeria faces in managing its foreign debt obligations while maintaining economic stability. The country’s net foreign exchange reserves had reached a three-year high of $23.11 billion by the end of 2024, reflecting improvements in its external financial position. However, the recent decline underscores the need for careful fiscal management to balance debt servicing with economic growth strategies. Attributes $2.57 Billion Drop in FX Reserves to Debt Servicing Burden
The Central Bank of Nigeria (CBN) has attributed the decline in the country’s foreign exchange reserves by $2.57 billion in the first quarter of 2025 to the financial strain of servicing foreign debts. This decrease represents a 6.29% drop from January to March 2025, with reserves falling from $40.88 billion to $38.31 billion over the period.
The CBN noted that significant interest payments on foreign-denominated debt were a major factor in the decline. In the first two months of 2025, Nigeria spent $816 million on foreign debt servicing, with $540 million paid in January and $276 million in February. These payments exerted substantial pressure on the country’s FX reserves, despite an otherwise strong position at the end of 2024.
Despite the challenges faced in the first quarter, the CBN remains optimistic about a rebound in reserve levels. The bank anticipates improvements as oil production increases and non-oil foreign exchange earnings rise, which are expected to boost reserves in the second quarter of 2025. The CBN’s efforts to stabilize the FX market include injecting liquidity, such as the recent $197.71 million injection, to maintain market stability and confidence.
This situation highlights the ongoing challenges Nigeria faces in managing its foreign debt obligations while maintaining economic stability. The country’s net foreign exchange reserves had reached a three-year high of $23.11 billion by the end of 2024, reflecting improvements in its external financial position. However, the recent decline underscores the need for careful fiscal management to balance debt servicing with economic growth strategies.
