Nigeria's Forex Reserves Bleed $850 Million: Traders Blame Election Spending and Currency Pressure

A growing sense of concern is emerging within Nigeria’s financial circles, as underlying pressures begin to draw increased attention. What may have once seemed subtle is becoming more difficult for policymakers and market observers to overlook.

The country's foreign exchange reserves have dropped by $850 million, and forex traders are not mincing words about what they believe is driving it. A combination of election-related spending and mounting currency pressures, they say, is bleeding the reserves at a rate that demands urgent attention from policymakers.

The development has landed at an already delicate moment for the Nigerian economy. The naira, which has endured one of the most turbulent currency episodes in its recent history, was only beginning to find a degree of stability. Now, fresh pressures are threatening to undo some of that fragile recovery before it can take root.

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Forex traders who spoke to analysts this week cited a familiar pattern: as Nigeria edges closer to another major election cycle, dollar demand tends to spike, driven by political actors moving money, campaign logistics, and the general anxiety that grips markets in the run-up to a contested election.

It is not the first time this dynamic has played out, and those who have watched Nigerian financial markets long enough say the pattern is almost predictable.

The Central Bank of Nigeria has not been silent on the matter. 

The apex bank recently moved to tighten oversight of diaspora inflows, directing all International Money Transfer Operators to route transactions through designated naira settlement accounts in commercial banks. 

The directive is widely seen as a bid to bring more foreign currency flows under official supervision, reducing the leakage that has historically fed the parallel market. 

Whether it will be enough to halt the reserve slide is another question entirely.

The figures paint a troubling picture. Forex market participants point to heavy election-related spending and ongoing foreign exchange strain as major factors behind the $850 million decline in Nigeria’s reserves. 

This is a significant hit for an economy already under pressure. The country’s foreign reserves act as a key shield against external shocks, and any prolonged depletion reduces the Central Bank’s ability to stabilize the naira when demand for dollars rises.

What makes the current situation particularly concerning is the backdrop against which it is unfolding. Global energy markets have been rattled by geopolitical tensions, and while Nigeria's Dangote refinery has been running at full capacity and expanding exports to African neighbours affected by supply disruptions, the country's revenue picture remains uneven.

Higher oil prices should theoretically translate into more dollar inflows for the government, but structural challenges in production and the speed of revenue repatriation mean the benefits are rarely felt as quickly as needed.

The Centre for the Promotion of Private Enterprise has already forecasted that the dollar to naira exchange rate would likely remain in a wide band through the second quarter of 2026, somewhere between N1,340 and N1,430.

That projection, made just days ago, now looks even more relevant against the backdrop of a falling reserve.

A thinner buffer means less capacity for the CBN to intervene and smooth out sharp movements, which in turn means more volatility for businesses, importers, and ordinary Nigerians who rely on a stable exchange rate to plan their lives.

Nigerian banks, meanwhile, are under their own set of pressures. The CBN has set an April 30 deadline for lenders to submit Board-approved Risk-Based Capital stress test reports. 

It is a regulatory exercise, but it signals that the apex bank is watching the sector's resilience closely and is not prepared to leave anything to chance heading into an uncertain period.

The political economy dimension of this story cannot be understated. As Nigeria accelerates towards the 2027 election season, both the federal government and opposition formations are spending heavily, including on international lobbying.

Visblog Reports this week confirmed that the federal government has committed up to $9 million for lobbying efforts in Washington alone, while opposition figures are running their own international campaigns.

All of that movement of money, even when conducted through legitimate channels, has consequences for the foreign exchange market.

For the average Nigerian business owner or investor watching the naira, the key question right now is not just whether the reserves will stabilise, but whether the institutions responsible for managing them have the tools, the will, and the political independence to act in the economy's best interest rather than in the interest of the electoral calendar.

The CBN has demonstrated, over the past two years, a willingness to make unpopular decisions in pursuit of macroeconomic stability. 

But no central bank can fully insulate an economy from the pressures that elections generate. The next several months will test just how much of that stability holds.

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