Nigeria’s foreign reserves surged to $40.7 billion as of August 8, 2025, largely propelled by increased forex inflows resulting from Central Bank of Nigeria (CBN) reforms and a modest rise in crude oil output.
According to the latest data released by the CBN, gross external reserves were $37.934 billion on April 30, 2025, climbed to $38.298 billion by May 14, and have since continued to grow to their current level. This steady accumulation of reserves is attributed to the positive effects of economic reforms instituted by the CBN, along with declining inflation rates, falling commodity prices, and sustained long-term stability of the naira.
This economic stability has brought multiple advantages to businesses, households, and broader macroeconomic indicators. Foreign reserves have remained above the $40 billion mark for nearly two weeks, closing last week at $40.72 billion, with sufficient capacity to cover over 10 months of import needs for the economy.
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The naira has maintained stability, while the inflation rate has steadily decreased, closing July at 21.88 percent. This represents the fourth consecutive month of decline from 22.22 percent in June, as reported by the National Bureau of Statistics (NBS). The latest Consumer Price Index (CPI) report showed that July’s inflation rate was 0.34 percentage points lower than June’s and 11.52 percentage points below the 33.40 percent recorded in July 2024.
The NBS stated, “The Consumer Price Index rose to 125.9 in July 2025, up 2.5 points from 123.4 in June. In July 2025, the headline inflation rate eased to 21.88 percent compared to June’s 22.22 percent.”
Ngozi Okonjo-Iweala, director-general of the World Trade Organisation (WTO), recently affirmed that economic reforms implemented by the Federal Government have contributed significantly to stabilising the economy. She remarked, “The President and his team have worked hard to stabilise the economy, and you cannot improve an economy unless it’s stable. So, he deserves credit for this stability. The reforms are headed in the right direction. What is needed now is growth, alongside social safety nets to support those affected by the reforms.”
Nigeria’s oil production rose by 0.67 percent in July to 1.51 million barrels per day (mbpd), hitting OPEC+’s quota of 1.5 mbpd for the third time this year. While production remains below the 2025 benchmark target of 2.06 mbpd, a slight increase is expected in August, which should contribute further to the reserves.
The reserves growth was partly driven by the forex reforms led by the Olayemi Cardoso-led CBN. New policies by the Federal Government aimed at boosting local production, reducing forex demand pressures, and easing domestic prices have played a key role in maintaining macroeconomic stability.
The expectation is that the apex bank will sustain forex reforms while fiscal authorities intensify efforts to enhance FX earnings, particularly from gas, oil, and non-oil exports.
Under Cardoso’s leadership, the CBN is diversifying FX sources to increase dollar inflows and improve dollar access for manufacturers and retail users. Initiatives include enhancing diaspora remittances through new product development, licensing additional International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and facilitating timely access to naira liquidity for IMTOs. These measures have streamlined dollar inflows for authorised dealers and other value chain players. This approach has significantly boosted gross FX reserves and supported naira stability.
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Recognizing the strategic importance of FX inflows for monetary and fiscal stability, the CBN is focused on attracting increased inflows into the economy. Diaspora remittances, estimated at $23 billion annually, remain a dependable source of forex. The apex bank continues to explore new sources and policies to sustain dollar inflows.
The CBN’s initiatives have driven continued growth in remittances, aligning with its goal to double formal remittance receipts within a year. These inflows are expected to rise further as the CBN works to strengthen public confidence in the foreign exchange market, build a robust and inclusive banking system, and promote price stability, essential components for sustained economic growth.
The average cost of living has improved, supported by forex market stability, increased agricultural productivity, and enhanced security, all contributing to a reduction in inflationary pressures for the fourth consecutive period.
Several economic and financial firms, including Financial Derivatives Company (FDC), Coronation Group, Arthur Steven Asset Management, Cordros Capital Group, and HighCap Securities, identified improved macroeconomic stability as a key factor behind the ongoing decline in the average cost of goods and services.
Most analysts anticipate that the disinflation trend will continue, potentially paving the way for the CBN to cut its benchmark interest rate for the first time.
However, risks such as increased demand for forex, forecasted flooding, security challenges, and potential declines in global crude oil prices could threaten this disinflationary momentum.
Bismarck Rewane’s FDC projected inflation to fall by 88 basis points to 21.34 percent in July 2025, attributing this to improved food production and forex market stability.
According to FDC, the headline inflation decline broadly reflected price reductions in key food items such as tomatoes, yams, beans, onions, pepper, and garri.
FDC expects all inflation sub-indices to follow the price moderation trend, signaling a broad-based easing of inflation rather than a narrow one.
“During our July survey, most essential commodity prices declined, while 68.57 percent of items remained stable, including rice, wheat flour, semovita, eggs, Irish potatoes, basmati rice, and vegetable oil. Import-dependent staples such as titus fish, basmati rice, and beverages also maintained price stability,” FDC reported.
“With the harvest season underway, further price declines are expected in the coming months, which should alleviate inflationary pressures stemming from increased liquidity due to higher FAAC allocations. The main risks to these projections include security challenges in food-producing states, falling oil prices, and hikes in PMS prices,” FDC added.
Coronation Group anticipates headline inflation to drop by approximately 70 basis points to 21.52 percent in July 2025.
Coronation analysts highlighted four key factors reducing inflation: the passthrough effect of CBN’s forex policy reforms supporting naira stability, lower domestic energy costs, price declines in some farm produce due to early harvests, and favorable base effects.
They noted, “The inflation outlook for August suggests potential moderation, supported by continued forex stability and easing food prices linked to the early harvest season. If forex stability persists and harvest gains continue, headline inflation could remain close to July’s level.”
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“However, risks include a sharp naira depreciation from external shocks, rising fuel prices due to global geopolitical tensions, and increased food prices caused by recent flooding in Nigeria, which has damaged farmlands and disrupted key logistics routes. These could reverse the disinflationary trend, pushing inflation above 22 percent or slowing the pace of moderation,” Coronation Group cautioned.
Cordros Capital Group analysts observed that disinflation and improved macroeconomic stability, evidenced by better oil production, a relatively stable currency, and improved financial conditions could stimulate stronger economic activity.
“Food inflation is expected to ease in July due to increased supply of seasonal farm produce like green maize, groundnuts, pumpkins, and vegetables from the early green harvest, which will relieve price pressures on domestically produced food, particularly in southern and middle-belt regions,” they said.
“Nonetheless, ongoing insecurity in northern food-producing areas continues to disrupt farming and transport, tightening the overall food supply. Imported food inflation may also slow down, supported by naira stability. Reduced exchange rate volatility should lower import costs for processed and packaged foods, helping to contain price increases in that segment,” Cordros added.
Arthur Steven Asset Management analysts suggested that prices could continue to fall due to lower energy costs and forex market stability.
HighCap Securities emphasised that reduced currency volatility, better food supply, and lower logistics costs create an ideal environment for continued inflation decline.
The recent improvement in the exchange rate is expected to reduce import costs. The naira appreciated notably last week, strengthening from N1,580 to N1,530 per dollar in the parallel market, a gain of about 3.3 percent. It exchanged at N1,536 per dollar in official markets, creating a N6 per dollar gap between the two.
Import costs in Nigeria include various taxes and charges, mainly import duties, VAT, and other levies, which are calculated based on the CIF value (Cost, Insurance, and Freight) of goods. This value includes the cost of goods, insurance, and shipping before any import duties or internal trade and transport margins.
Exchange rate fluctuations significantly impact import costs, as duties and charges are often calculated using the prevailing exchange rate.
According to the United Nations COMTRADE database, Nigeria’s total imports in 2024 were valued at $40.97 billion, with main partners being China, Belgium, and India.
New data from the NBS shows that Nigeria imported food and beverages worth N1.67 trillion ($1 billion) in the first quarter of 2025 (January–March), a 5 percent increase from N1.59 trillion in the same period in 2024.
Cordros Securities analysts said the naira appreciation cushioned the impact of rising imported fuel prices caused by tensions in the Middle East.
“We expect FX liquidity to stay robust, supported by reduced global pressures and stronger market confidence, which continues to attract foreign portfolio investor inflows. Additionally, a stronger net FX reserve position enhances the CBN’s ability to intervene when necessary. Barring unexpected shocks, we anticipate the naira will remain stable in the near term,” they said.
