Nigeria’s external reserves, which provide the Central Bank of Nigeria (CBN) with the capacity to support the naira and meet external obligations, have continued to trend downward despite rising global oil prices driven by geopolitical tensions in the Middle East.

Data from the CBN showed the reserves declined for the seventh consecutive session, falling by 0.89 percent to $49.57 billion as of March 24, 2026, from a recent peak of $50.02 billion recorded on March 11, 2026.

Global oil markets had surged in recent weeks amid tensions linked to the ongoing U.S.-Iran conflict, pushing crude prices close to $120 per barrel. Prices, however, retreated to below $100 per barrel on Wednesday after comments from the U.S. President Donald Trump suggested Iran may be open to negotiations.

Analysts say Nigeria has been unable to fully benefit from the oil price rally due to structural constraints, particularly weak production levels.

Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto & Co., said while crude oil prices have trended upward, Nigeria’s output has remained below its OPEC quota, limiting the country’s ability to maximise gains from higher prices.

“Unfortunately, in a period of crisis, foreign portfolio investors allocate more to USD and other safe-haven assets. Thus, we have seen some outflow from portfolio investors,” he said.

Ayodele Akinwunmi, chief economist at United Capital Plc, said Nigeria’s foreign reserves, measured on a 30-day moving average, have declined in recent days because increased oil prices have not translated into sufficient foreign exchange inflows to meet demand.

He added that global uncertainty tied to the Middle East crisis has triggered a flight to safety from emerging markets, further weighing on reserves.

“Unless oil production improves and foreign capital returns, the reserves are likely to remain under pressure despite favourable oil prices,” he said.

Although geopolitical tensions, particularly the Iran-related conflict, have driven capital outflows from emerging markets globally, Nigeria has continued to record modest portfolio inflows, according to a report by the Financial Markets Dealers Association.

Olayemi Cardoso, governor of the CBN said the global economy is facing renewed shocks driven by persistent geopolitical tensions, including recent developments involving the United States, Israel and Iran. He noted that such events could push energy prices higher, disrupt supply chains and heighten investor risk aversion.

Cardoso, however, said Nigeria’s macroeconomic reforms and strengthened policy buffers over the past two years have positioned the economy to better withstand external shocks.

“The storms may come, but our house will stand firm. Strong foundations matter, whether for individuals, institutions or nations,” he said.

Ayodeji Ebo, managing director and chief business officer at Optimus by Afrinvest, said higher oil revenues could help stabilise the naira by boosting foreign exchange inflows and strengthening reserves.

He cautioned, however, that persistent inflationary pressures and rising global risk aversion could still trigger capital outflows, potentially weakening the currency. He added that volatility in the parallel market could widen exchange rate gaps, with implications for remittances and import costs.

Nigeria’s current account surplus narrowed in 2025, reflecting rising external pressures. Provisional balance of payments data published by the CBN showed the surplus fell to $14.04 billion in 2025 from $19.03 billion in 2024, though it remained above the $6.42 billion recorded in 2023.

According to the CBN, rising outflows weighed on the current account position. The services deficit widened to $14.58 billion from $13.36 billion, driven by higher payments for transport, travel, insurance and government services. Net outflows in the primary income account surged by 60.88 percent to $9.09 billion, reflecting increased dividend and interest payments to foreign investors.

The secondary income account, which captures remittances and official transfers, edged lower to $23.20 billion from $24.88 billion, as inflows from both official development assistance and personal transfers declined. Nonetheless, diaspora remittances remained a critical source of foreign exchange support for the economy. (BusinessDay)

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