By William Emmanuel Ukpoju
On August 19, 2025, the Central Bank of Nigeria (CBN) confirmed that the country’s external reserves had risen to $41.0 billion, the highest level since December 2021. For government officials and international investors, the figure is a signal of restored financial health and credibility. For everyday Nigerians, however, the milestone has done little to ease the painful squeeze of inflation, stagnant wages, and mounting living costs.
This contrast between progress on paper and the reality of pain defines Nigeria’s current economic situation. With $41.0 billion in gross reserves and $40.3 billion in net reserves, Nigeria has built a buffer not seen in nearly four years. For comparison, reserves fell perilously close to $37 billion months ago, partly due to debt repayments. The recovery highlights the economy’s resilience and the careful management of foreign assets. Reserves act as a form of national insurance. They are used to defend the currency, pay for imports, and reassure investors that the country can meet external commitments. Analysts point out that with nearly 10 months of import cover, Nigeria far surpasses the global standard of three months, placing it in a more robust external position than many of its counterparts.
What Drove the Gains?
Unlike in the past, when reserves climbed during oil booms, Nigeria’s latest milestone was achieved even as oil prices softened below $70 per barrel. The increase stems from a combination of factors:
• Higher Oil Production – Nigeria’s daily crude output has steadily risen to around 1.8 million barrels per day, a welcome recovery after years of underperformance.
• Diaspora Remittances – Official remittances from Nigerians abroad surged to nearly $21 billion in 2024, helping offset weak foreign direct investment inflows. These personal transfers now represent one of Nigeria’s most stable and significant sources of foreign exchange.
• Non-Oil Exports and Capital Inflows – Agricultural exports, tech services, and renewed portfolio investments have added to inflows.
• Prudent CBN Management – The Central Bank aggressively reduced its short-term dollar liabilities, meaning fewer obligations drain the reserves. Every dollar now “sticks” longer.
Together, these measures explain why reserves rose even as oil markets faltered.
Inflation and the Cost of Living
However, the increase in reserves has not led to relief at the market stalls and supermarkets where Nigerians buy food. Inflation remains persistently high; official estimates put it above 22% year-on-year, with food inflation even higher.
“I hear the news about $41 billion in reserves, but it doesn’t change the fact that I can’t pay my children’s school fees this term,” says Moses Adeyemi, a civil servant in Abuja. “My salary has not increased, but everything around me, food, transportation, rent, has doubled.”
For teachers, the situation is just as dire.
“We are asked to explain economics to our students, yet I can’t explain why I earn N85,000 a month and spend nearly N80,000 on just food and transport,” laments Grace Nwosu, a secondary school teacher in Enugu. “When I hear about reserves rising, I wonder why hospitals are still under-equipped and why our salaries are not being reviewed.”
Ordinary Nigerians echo the same frustration.
“My landlord is threatening to throw me out because I can’t meet the new rent,” says Bashir Lawal, a taxi driver in Kaduna. “Medical bills are unpaid, my wife is due for surgery, and yet the government is clapping for itself about foreign reserves. We don’t eat reserves.”
The irony is clear: while Nigeria’s reserves are robust, inflation has eroded the spending power of millions. For many households, stability at the macro level feels meaningless without affordability at the micro level.
Debt Servicing and Fiscal Strain
Nigeria’s external reserves are not just for show; they are also a lifeline for meeting external debt obligations. The country’s external debt stock has ballooned in recent years, with analysts speculating an annual servicing cost exceeding $6 billion.
Every time Nigeria pays bondholders or settles obligations with international lenders, reserves are drawn down. This is why the surge to $41 billion matters: it reassures investors that Nigeria will not default. However, it also highlights the fiscal bind.
The federal government spends nearly 90% of its revenue on debt servicing, leaving little for education, healthcare, or infrastructure. Even with a stronger reserve base, the pressure on domestic budgets remains acute. Unless the revenue base expands, Nigeria risks sustaining external credibility at the expense of internal development.
The Naira Question
For the Central Bank, a key role of the reserves is to defend the naira. At around N1,530 per dollar, the currency has been more stable in recent months. The spread between the official and parallel market has narrowed to about N20, compared to gaps of over N200 last year.
This stability is partly due to higher reserves, which reassure traders that the CBN has “ammunition” to intervene. However, currency stability has not lowered inflation meaningfully. Imported goods remain expensive, transport costs remain high, and local wages have not kept pace.
As one analyst put it: “Nigeria is winning the macro battle but losing the household war.”
Nigeria in an African Context
When compared with its African peers, Nigeria’s $41 billion reserves tell a story of strength and fragility combined.
• South Africa – With reserves of about $68 billion, South Africa holds a larger buffer despite having a smaller population. Its inflation is also lower (around 5%), making the reserves more impactful in real terms.
• Egypt – Reserves stand at about $49 billion, but the Egyptian pound has lost more than half its value since 2022, and inflation is rising to 30%. In this sense, Nigeria’s position looks healthier.
• Kenya – With just $11 billion in reserves, Kenya struggles with currency pressure and debt service, relying on IMF support.
• Ghana – Holding around $10 billion, Ghana has also faced a debt crisis and turned to the IMF.
By this comparison, Nigeria sits in the upper tier of African economies in terms of liquidity. Yet, unlike Libya, which holds about $92 billion, Nigeria cannot rest easy. Its large population means that reserves per capita are among the lowest in this group.
Policy–People Disconnect
The paradox is striking: Nigeria’s external accounts are healthier, but its internal economy remains painful. The question is whether the government can bridge the policy–people disconnect.
Economists suggest three areas of focus:
• Targeted Inflation Control – Beyond stabilising the naira, measures to reduce food prices through better logistics, agricultural support, and import facilitation are critical.
• Wage Reforms and Social Protection – Without wage adjustments or safety nets, inflation will continue to crush the middle class.
• Debt and Revenue Strategy – Expanding the tax base and curbing unsustainable borrowing will prevent reserves from being drained just to pay interest.
Beyond the Numbers
For policymakers, the $41 billion reserve is a victory. For international investors, it is a reassurance. But for Nigerians like Moses, Grace, and Bashir, it remains a distant figure.
Until the cushion in foreign reserves translates into affordable garri in the market, accessible healthcare in hospitals, and manageable rent in cities, the celebration will remain muted.
As one Lagos trader put it:
“Reserves are good, but I can’t cook them for my family. What I need is money that buys food.”
Nigeria’s $41 billion external reserves milestone demonstrates prudent economic management and signals restored confidence to the world. But unless matched with deliberate policies that ease inflation, raise incomes, and protect the vulnerable, it risks becoming a hollow achievement.
The challenge for Nigeria is clear: to ensure that stability at the top of the pyramid trickles down to security at the bottom. Until then, the country’s reserves will remain an impressive headline number, but not a lived reality for millions of struggling citizens.