Nigeria's external reserves have suffered a significant decline, dropping by $1.19 billion in just three weeks, according to recent data. The country's gross external reserves, which had reached a high of $40.920 billion on January 6, 2025, fell to $39.723 billion by January 31st. This marks a substantial decrease, sparking concerns about the country's economic stability.

The Financial Derivatives Company (FDC), led by Bismarck Rewane, has predicted that Nigeria's gross foreign reserves will fall by 11.47% in 2025 to $36.21 billion, before increasing to $37.65 billion in 2026. This decline is attributed to various factors, including international debt service requirements and the Central Bank of Nigeria's (CBN) foreign exchange operations.

Experts suggest that the reserves are being diverted to meet various obligations, including international debt service requirements and budget expenditures in USD. An informed source stated that the reserves are used for multiple purposes, including repaying external loans, paying coupons on Eurobonds, and funding budget expenditures in USD.

Nigeria had recently issued $2.20 billion in Eurobonds, marking its return to the global debt market after a two-year hiatus. The bonds were popular among investors, with an order book of over $9 billion, due to their attractive yields compared to recent SSA issuances.

The country's currency, the naira, has been appreciating, and the CBN's involvement in the markets is reportedly less than 10%. However, experts argue that Nigeria might have been better off waiting until 2025, when moderating U.S. inflation could lead to lower interest rates from the Fed.

Nigeria faces significant debt obligations, with Eurobond maturities averaging $1.33 billion annually over the next decade. Including coupon payments, total annual debt servicing costs could average $2.24 billion, according to CardinalStone analysts.

The decline in Nigeria's external reserves has significant implications for the country's economy and its ability to meet its debt obligations. As the country navigates this challenging economic landscape, it remains to be seen how it will address its debt obligations and stabilize its economy.

In conclusion, Nigeria's external reserves have taken a significant hit, and experts predict further declines in the coming year. The country's ability to manage its debt obligations and stabilize its economy will be crucial in the face of these challenges.