Determinants of Foreign Reserves in Nigeria

This study investigates the determinants of Nigeria’s foreign reserves from 1990 to 2024, addressing persistent concerns over the limited effectiveness of key macroeconomic variables in influencing reserve accumulation. This study specifically examines the impact of the exchange rate (EXR), oil price (OP), and interest rate (INT) on foreign reserves. Employing an ex-post facto research design and the ARDL framework; and data sourced from Central Bank of Nigeria Statistical Bulletin and the World Bank Development Indicators, the findings reveal that the exchange rate has a positive but statistically insignificant effect on foreign reserves. Oil price exhibits a negative and insignificant relationship with reserves, while interest rate also shows a negative and insignificant influence. The study concludes that during the period under review, exchange rate movements, oil price fluctuations, and interest rate adjustments did not significantly influence Nigeria’s foreign reserves. These results highlight the need for improved exchange rate management, better fiscal discipline in oil revenue utilization, and policies to attract stable capital inflows, thereby providing useful insights for policymakers and enriching the empirical literature on reserve dynamics in emerging economies.