Nigeria net FX reserves surge to $40bn on reforms

Nigeria’s net foreign exchange reserves have climbed to roughly $40 billion, up from just over $3 billion when the country initiated its latest round of economic reforms. Central Bank of Nigeria Governor Olayemi Cardoso disclosed the figures at the BusinessDay CEO Forum in Lagos, noting that gross external reserves now stand at about $52 billion.

The recovery in net reserves addresses the external liquidity constraints that previously deterred international capital. Because net reserves reflect the actual usable foreign currency buffer available to the central bank, this metric is heavily scrutinized by fixed-income and equity investors assessing currency risk.

The $3 billion starting point became a flashpoint for market anxiety after it was highlighted by J.P. Morgan. “When we started, the net exchange reserves figure was in the region of about $3 billion-plus. And if you remember, that was a figure that was published at the time by J.P. Morgan and created a lot of panic in the system,” Cardoso said.

Eliminating these FX market distortions has been the central bank's primary focus. By addressing the structural issues that drained liquidity, policymakers have rebuilt the external buffer that Cardoso said is necessary to restore confidence in the broader economy.

The central bank governor is now using this restored stability to urge corporate leaders to deploy capital. “So, in a nutshell, I do believe that where we are now, we’ve achieved that hard-earned stability, and with stability comes potential for investment, and with investment comes growth, and all our local CEOs should be part and parcel of that train that is moving,” he said.

For market participants, the shift in rhetoric from crisis management to economic expansion indicates that the most volatile phase of Nigeria's macroeconomic adjustment has passed. The immediate test is whether businesses and foreign investors will translate this improved FX stability into actual capital commitments.