Nigeria’s FX reserves are down to 6-year low amid plunging currency

As of the end of December, Nigeria's foreign exchange reserves hit a six-year low, standing at $32.87 billion. This decline was primarily driven by the central bank's active selling of dollars to support the struggling local currency.

In response to the naira's depreciation, the Central Bank of Nigeria (CBN) took measures to defend the currency, depleting its foreign exchange reserves. These reserves reached a peak of $47.63 billion in June 2018 and were significantly reduced by December, reaching a level last seen in September 2017 at $32.16 billion.

A combination of factors, including a backlog of unsettled forwards, unfulfilled commitments for dollar inflows, and a two-decade high in inflation, contributed to a challenging year for the naira. The local unit lost over 50% of its value in 2023, ranking as one worst-performing global currencies during that period.