Dollar inflows into Nigeria’s FX market slide 21% as foreign investors retreat

U.S. dollar inflows into Nigeria’s official foreign exchange market fell sharply last week.

Total dollar inflows into the Nigeria Foreign Exchange Market (NFEM) declined by 20.67% week on week to US$593.70 million, down from US$748.40 million in the previous week.

A research report published by Coronation Merchant Bank also revealed that the Foreign Portfolio inflows plunged significantly during the period.

What the report is saying

The report indicated that the most significant pressure point came from the external segment, where foreign portfolio and direct investments deteriorated steeply.

Foreign portfolio investment (FPI) inflows plunged 72.91% to US$46 million, from US$169.8 million a week earlier, while foreign direct investment (FDI) dropped 81.87% to just US$7.00 million, compared with US$38.60 million previously.

As a result, foreign sources accounted for only 17.05% of total FX inflows, reinforcing concerns that global investors remain cautious about Nigeria’s macroeconomic and policy outlook, even after significant FX reforms in 2024 and 2025.

Local sources dominate FX supply 

With offshore participation fading, local sources provided nearly all the liquidity, contributing 82.95% of total inflows into the official market.

Individuals led the domestic supply with US$165.1 million, followed by the CBN with US$128.0 million, while exporters and importers contributed US$115.6 million.

Analysts say the growing dominance of domestic flows highlights Nigeria’s continued reliance on central bank intervention and local FX recycling, rather than sustainable foreign capital inflows.

Naira steadies officially, weakens on the street

The naira started the year on a mixed note. At the official window, the currency appreciated by 0.88% week on week to close at N1,430.85/US$, supported largely by sustained CBN dollar sales.

However, in the parallel market, the naira weakened to around N1,490/US$, reflecting lingering FX demand pressures outside the formal trading system.

Coronation Research noted that while intervention has helped stabilise the official rate, underlying structural pressures remain unresolved, particularly from recovering import demand and subdued foreign investment inflows.

Reserves inch up as CBN defends currency 

Nigeria’s gross external reserves rose marginally by 0.58% to US$45.50 billion, adding about US$264.56 million at the start of the year.

The increase comes despite heavy FX market intervention, with the CBN estimated to have spent about US$4.1 billion in the first half of last year to defend the naira and support market liquidity, according to the Coronation report.

The deployment of platforms such as BMatch (Bloomberg FX Matching System) and EFEMS (Electronic Foreign Exchange Matching System) has improved interbank transparency and narrowed the gap between official and parallel market rates.

Still, analysts warn that stability remains fragile without a sustained rebound in autonomous FX inflows.

What you need to know

Bloomberg FX Matching System is the Bloomberg-powered electronic FX trading platform adopted by the CBN to enhance transparency, price discovery, and efficiency in Nigeria’s foreign exchange market. It is the specific matching engine integrated into the Nigerian FX market to improve liquidity and transparency

Similarly, the Electronic Foreign Exchange Matching System is the CBN’s FX trading and reporting system used by authorized dealers (banks) to match FX orders and report transactions directly to the CBN. It is the broader CBN FX infrastructure for transaction reporting and monitoring.

These were part of the financial market measures introduced by the apex bank to improve efficiency, liquidity and transparency in Nigeria’s foreign exchange market.

Outlook: stability hinges on investor confidence 

In the near term, the naira is expected to trade within a relatively narrow band at the official window, supported by continued CBN intervention and seasonal easing in FX demand following year-end pressures.

Looking ahead to 2026, Coronation projects the naira will trade within a N1,400–N1,500/US$ range, underpinned by higher oil production, reduced reliance on refined fuel imports, and improved export-driven FX liquidity.

However, the bank cautioned that durable exchange-rate stability will depend on policy consistency, stronger investor confidence, fiscal discipline, and a more transparent, market-driven FX framework capable of attracting long-term foreign capital. (Nairametrics)