Nigeria’s foreign exchange reserves first broke the records in November 2024 when it leisurely crossed the $40 billion mark.
It had hovered around $33 billion since 2008. In 2008 Nigeria’s foreign exchange reserves stood menacingly at $68 billion. That was when crude oil price sailed perilously close to $150 per barrel.
The record did not last because crude oil price tumbled below $50 per barrel within weeks of the record price of $148 per barrel.
Since that strange development in the global oil industry, Nigeria’s foreign exchange reserves could not hit the $40 billion mark.
The Central Bank of Nigeria (CBN) was curiously silent on the cause of the new record created by the foreign exchange reserve on Tuesday, August 19, 2025. On that eventful day, Nigeria’s foreign exchange reserve rose to $41 billion.
Despite the CBN deafening silence on the causes of the new record created by the nation’s foreign exchange reserves, pundits contend that like the development in 2008 when the reserves broke the record to stand menacingly at $68 billion, the new record created by the reserves was instigated by developments in the global crude oil price.
Crude oil export proceeds account for 70 per cent of Nigeria’s foreign exchange income. That obviously is why the new record was created.
Developments in the global crude oil market boxed Nigeria into a very tight corner in the second quarter of 2025. The enigmatic tariff entanglement by America’s pugnacious President Donald John Trump pushed the global economy precipitously to a brewing trade war.
Oil market watchers concluded that the brewing trade war would result in a drastic drop in crude oil consumption as the economies of leading nations suffer from low consumption of goods and the consequent drop in demand for manufactured goods due to spiraling prices. That conclusion drove down the price of crude oil.
By the closing days of April 2025, the price of Nigeria’s high grade oil, Bonny Light, had dropped to $65 per barrel, down from the 2025 budget oil reference price of $75. Everyone in the federal government was worried about how to balance the budget as the twin evils of low oil price and abysmal production in Nigerian oil fields made the budget’s oil reference price of $75 per barrel and production target of 2.02 million barrels per day seemingly impossible.
The low oil demand feared by global oil market watchers failed to materialise as Trump momentarily backed down from his tariff high horse ride.
Oil prices surged and by the opening days of August, Nigeria’s high grade Bonny Light was back to $75 per barrel as it was in the opening days of 2025.
Besides the rise in crude oil prices, there were marginal gains from the war on crude oil theft in Nigeria declared by President Bola Ahmed Tinubu.
The president ordered his Chief of Defence Staff, General Christopher Musa, to clip the wings of the mega oil thieves in the nation’s oil fields.
Musa relayed the president’s order to his field commanders and they got cracking. The military has not succeeded in clipping the wings of the oil thieves but Nigeria has recorded a marginal increase in crude oil production as the mega oil thieves duck for cover from the intensified patrols by Musa’s men.
Daily crude oil production inched up to 1.5 million barrels, up from a record low of 1.3 million barrels per day. Pundits believe that the $10 gain from crude oil price and 200,000 barrels per day increase in oil production raked in most of the $1.4 billion recorded in August that pushed foreign reserves to $41 billion.
Another factor that might have contributed to the surge in foreign exchange reserves is the boom in non-oil exports which was more pronounced since the first half of 2025.
Even diaspora remittances, the money sent to relatives by Nigerians in the diaspora, might have contributed its quota to the rise in foreign exchange reserves. Nigeria earned $20.9 billion from diaspora remittances in 2024. It is expected to be higher this year.
The surge in foreign exchange reserves is commendable. It will give the CBN considerable leverage over the exchange rate of the naira. It would enable it to rein in the disorderly depreciation of the naira. However, that could only happen if the CBN is willing to halt the forex round-tripping, speculative biddings and forex hoarding by banks.
Strangely enough, CBN rolled out the drums to celebrate the rise in foreign exchange reserves to $41 billion as if it generated the foreign exchange that pushed up reserves.
This columnist is worried that someone could celebrate reserves of $41 billion by a nation of 218 million people.
Israel, a tiny desert nation of 10 million people, musters reserves of $228.25 billion and is not making any noise. Israel has been at war with its neighbours since the day David Ben Gurion declared the Republic in 1948.
Yet it has stronger reserves than Nigeria which has enjoyed peace most of the time.
With reserves of $41 billion and a population of 218 million, Nigeria is in a more precarious situation than war-torn Afghanistan.
Afghanistan, a country of 42.6 million people, has been at war since December 24, 1979, when Leonid Brezhnev, then president of the defunct Union of Soviet Socialist Republics (USSR), ordered the invasion of Afghanistan.
Brezhnev died in November 1982, as the invasion remained stalled with the Mujahidin bugging down embattled Soviet soldiers. Afghanistan defeated the Soviet Union after 15 years of occupation and they fled.
The United States invaded in 2001 in search for Osama bin Laden, the terror kingpin who masterminded the terror attack on America’s Twin Tower.
The U.S. occupied Afghanistan for 20 years and fled in 2021 as the Taliban recaptured their country. Even as the U.S fled in defeat in 2021, Afghanistan is still fighting internal insurgency.
Despite 46 years of war, Afghanistan’s foreign exchange reserve at $10 billion for 42.6 million people is stronger than Nigeria’s $41 billion for a population of 218 million. CBN must have this in mind.