FX reforms, oil inflows push reserves above $54bn

A broader FX-market overhaul, stronger foreign-currency inflows and tighter monetary policy have helped push gross external reserves above $54bn under CBN Governor Olayemi Cardoso, as oil earnings and other external flows remain important drivers of the increase, JUSTICE OKAMGBA writes

Nigeria’s foreign reserves have increased by more than $21bn since Olayemi Cardoso became Governor of the Central Bank of Nigeria, giving the country a much bigger dollar buffer than it had when he took office.

The reserves stood at $54.61bn as of September 14, 2026, according to CBN data. That is up from $41.84bn a year earlier and represents a 30.5 per cent increase. It is also about $20.8bn higher than the $33.22bn recorded at the end of December 2023, a few months after Cardoso assumed office.

The increase has come as the banking regulator has changed how Nigeria’s foreign-exchange market operates, tightened monetary policy, cleared a large backlog of unpaid foreign-exchange obligations and introduced measures aimed at bringing more dollar transactions into the formal financial system.

However, the rise in reserves cannot be credited to the CBN’s reforms alone. Several factors determine how much foreign currency Nigeria has, including earnings from crude oil, oil production, non-oil exports, money sent home by Nigerians abroad, foreign investments, external borrowing and government transactions.

This means the $54.61bn should not be seen simply as money generated by the apex bank’s reforms. The reforms have changed how foreign exchange is traded and managed in the country, but the dollars themselves come mainly from Nigeria’s foreign-currency earnings and inflows.

Cardoso assumed duty as CBN governor in an acting capacity on September 22, 2023, after President Bola Tinubu appointed him on September 15, pending Senate confirmation. The CBN records his formal tenure as governor from October 5, 2023.

At the end of September 2023, the CBN’s Economic Report put Nigeria’s external reserves at $32.79bn. At that level, the reserves were enough to cover about 6.3 months of the country’s imports of goods and services.

There is also a difference between the CBN’s gross and net reserves. Gross reserves refer to the total foreign assets held by the central bank, while net reserves give a more limited picture after certain liabilities and obligations are taken into account.

The improvement in net reserves has also been significant. The CBN chief said in February 2026 that net foreign-exchange reserves had risen to $34.8bn at the end of 2025, from $3.99bn at the end of 2023.

“When we started, the net exchange reserves figure was in the region of about $3bn-plus,” Cardoso said at the BusinessDay CEO Forum in Lagos in July 2026.

The International Monetary Fund has broadly supported Nigeria’s CBN reforms, including tighter monetary policy, a more flexible and unified foreign-exchange market, reduced CBN financing of government deficits, stronger CBN governance and bank recapitalisation.

It says these measures have helped improve macroeconomic stability, rebuild foreign reserves and strengthen the banking system. However, it has urged the CBN to keep policy tight until inflation falls sustainably, improve policy communication, strengthen banking supervision and continue reducing exchange restrictions when conditions permit.

Similarly, the World Bank has also welcomed the direction of the reforms, particularly the move towards a unified, market-reflective exchange rate and a monetary-policy framework focused on price stability. The biggest lender says the reforms are beginning to improve Nigeria’s fiscal position, reserves and economic resilience but warns that they have caused significant short-term pressure through high inflation, increased living costs and weaker purchasing power.

Unified FX market

When the new CBN leadership took over, Nigeria’s foreign-exchange market was operating with different exchange rates, while many businesses struggled to get dollars through official channels.

The CBN responded by changing how the market worked. It moved towards a more market-driven system in which demand and supply would have a greater role in determining the exchange rate. The bank said the June 2023 willing-buyer, willing-seller policy helped remove the different FX windows and bring the market segments together under the Nigerian Foreign Exchange Market.

The aim was to make the exchange rate more transparent, improve the way prices were determined and reduce the gap between official and other exchange rates.

The CBN also removed restrictions on access to foreign exchange for 43 previously restricted items. It introduced other changes affecting bureaux de change, remittances and trade-related transactions. According to the bank, the measures were designed to make the market more open and transparent and reduce opportunities for people to make money from differences between exchange rates.

The changes, however, put significant pressure on the naira. As the CBN reduced its control over the exchange rate, the naira fell sharply, making imported goods and foreign-currency obligations more expensive in naira terms.

The central bank’s argument was that allowing the exchange rate to reflect market conditions would create a more transparent system and encourage more transactions to take place through official channels.

Economist and public affairs analyst Aliyu Ilias said the reforms had created frameworks aimed at addressing some of the country’s long-standing macroeconomic and monetary challenges.

“I think Cardoso has tried because he has developed a lot of frameworks to address the macroeconomic and monetary problems. He has made changes to the bureaux de change system and to import-related policies and put a lot of things in place,” he told The PUNCH.

He continued, “On the issue of foreign reserves, I think it is a good thing that we have been able to move our reserves to a higher level. Now, they can serve as collateral to borrow money and get things done.

“However, we sometimes continue to borrow money, and I think it is not only about keeping money in reserve. What about other things that need money immediately?

“Overall, I think we should commend him. He has carried out a lot of reforms and developed frameworks to help. We hope the fiscal side will also do well and complement the monetary side.”

The CBN later introduced new systems to make the market more transparent. In December 2024, it launched the Electronic Foreign Exchange Matching System, which uses Bloomberg BMatch to help banks and other eligible participants match foreign-exchange orders. The system gives the market greater visibility into FX transactions and allows exchange rates from trades to be published.

The CBN also introduced the Nigerian Foreign Exchange Code in January 2025. The code sets rules for how participants should conduct FX transactions, covering areas such as ethical behaviour, information sharing, risk management, compliance and settlement.

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Taken together, the changes marked a move away from a system where the CBN had greater administrative control over exchange rates towards one that relies more on market forces, transparency and competition.

$7bn backlog, remittances

One of the most immediate problems facing the CBN when Cardoso took over was a large stock of unpaid foreign-exchange obligations.

The central bank said it inherited more than $7bn in verified FX commitments. It subsequently audited the obligations and distinguished valid contracts from those that did not meet the required conditions.

By March 2024, the CBN announced that it had cleared all valid outstanding FX backlogs after making a final payment of about $1.5bn. The bank said the exercise was part of its effort to restore confidence in the FX market and address obligations that had accumulated under the previous system.

Clearing the backlog did not, by itself, increase reserves. In the short term, it required the CBN to release foreign currency to settle legitimate obligations.

The importance of the exercise was instead linked to market confidence. Businesses that had been unable to obtain dollars through official channels had faced difficulties paying suppliers, repatriating funds and meeting other foreign-currency obligations. By settling verified commitments, the CBN sought to remove one of the obstacles that had discouraged participation in the formal market.

The CBN later reported that reserves had risen to $37.9bn by July 2024, from $33.6bn in October 2023, while linking the improvement to its FX reforms and the clearance of the verified backlog.

Further, the CBN has also focused on increasing the amount of foreign currency entering Nigeria through formal remittance channels.

Remittances are important because they represent a major source of foreign exchange for households and the wider economy. However, money sent into Nigeria does not automatically become part of the CBN’s reserves. It can be sold through the financial system and used by recipients, importers and other market participants.

The policy objective has therefore been broader: to increase the share of remittances passing through regulated financial institutions and make formal channels more attractive to Nigerians living abroad.

The CBN has introduced measures aimed at integrating the diaspora more closely with the domestic financial system. In 2024, Cardoso said monthly remittances had risen from an average of about $300m in September 2023 to nearly $600m in August 2024.

The bank subsequently set a more ambitious target of reaching $1bn a month in diaspora remittances. “When we were building these reserves, there was a lot of cynicism. One of the things we decided to go after was the diaspora remittances,” Cardoso said.

He said the CBN had worked with banks and engaged Nigerians in different countries as part of the effort to increase formal remittance flows “At the time, we gave ourselves a goal that we would double the remittance inflows between the time we started and the end of the year, and we did exactly that,” he said.

The governor added that the effort remained ongoing, with the CBN targeting about $1bn a month in diaspora remittances.

The significance of the policy is less about treating every dollar sent home as a reserve addition and more about increasing the supply of foreign exchange available through the formal market. Greater visibility of these flows can improve liquidity and reduce reliance on informal channels.

Oil, critical driver

The country continues to depend heavily on oil exports for foreign-exchange earnings, making crude production, international prices and the collection of oil-related revenues important determinants of how quickly reserves accumulate.

Cardoso said gross external reserves rose to $52.52bn as of July 17, 2026, from $50.47bn at the end of May. He attributed the increase mainly to receipts from crude-oil-related taxes and third-party inflows. At that level, the reserves were sufficient to cover about 11 months of imports of goods and services.

The increase highlights why the reserve story should be viewed as a combination of policy changes and underlying foreign-exchange earnings.

The CBN can influence how efficiently foreign currency is brought into the formal market, how it is traded, and how much confidence investors and other participants have in the system. It cannot, however, determine the quantity of dollars generated by Nigeria’s exports.

That leaves the reserve position exposed to changes in oil production and international prices.

A sustained improvement in reserves therefore depends not only on maintaining a functioning FX market but also on Nigeria’s ability to generate foreign exchange from oil and non-oil exports, attract investment and retain more inflows within the formal financial system.

Tighter monetary policy

Under Cardoso, the CBN raised the Monetary Policy Rate repeatedly during 2024, taking it to 27.5 per cent. The tightening was aimed at containing inflation, managing liquidity and strengthening monetary-policy transmission.

The CBN has described the shift as part of a broader move towards a more conventional monetary-policy framework, including greater emphasis on liquidity management and price stability.

The rate remained at 27.5 per cent through much of 2025 before the Monetary Policy Committee began easing in 2026. In February 2026, the MPC reduced the MPR by 50 basis points to 26.5 per cent. It retained the rate at that level at its May and July meetings.

Higher interest rates can influence foreign-exchange conditions by reducing excess naira liquidity and improving the relative attractiveness of naira-denominated assets. They can also support efforts to stabilise the currency.

Analysts say monetary tightening does not mechanically increase foreign reserves. However, it can influence investor behaviour and domestic liquidity, while the actual stock of foreign assets depends on the balance of foreign-currency inflows and outflows.