The inflow of foreign exchange into the economy has peaked to a six-year high with foreign exchange (fx) inflows reaching $5.96bn in May, a report has indicated.
Data from FMDQ indicated that total inflows into the Nigeria Foreign Exchange Market (NFEM) rose by 62 per cent from $3.67 billion in April 2025 to $5.96 billion in May 2025.
The upsurge was driven largely by a substantial increase in inflows from both domestic and foreign sources.
The data indicated that domestic sources, which accounted for 83.2 per cent of total inflows, jumped by 64.2 per cent from $3.02 billion to $4.96 billion, its highest in six years.
Foreign sources, which accounted for 16.8 per cent of total inflows, also rose by 51.7 per cent from $657.40 million to $997.60 million, its highest in three months.
Further breakdown of FMDQ data
A breakdown from domestic sources showed that inflows from exporters-importers jumped from $655.7 million to $3.11 billion.
Inflows from non-bank corporates increased marginally from $1 billion to $1.11 billion, while those from individuals rose from $15.1 million to $91.4 million.
Notably, inflows from foreign portfolio investors (FPIs) rose by 61.3 per cent to $880.80 million, underlying increased foreign participation in the Nigerian market.
Naira eases at N1,539/$
This, analysts believe, is responsible for the recent stability of the naira with the local currency exchanging officially for N1,539.72 as of yesterday.
At the parallel market, it also stabilised between N1,605 and N1,610, according to Bureau De Change (BDC) operators in Lagos.
Experts also attribute the development to the series of reforms from the Central Bank of Nigeria (CBN) that triggered massive improvement in macroeconomic fundamentals.
Data from the CBN showed the naira has been on a steady appreciation at the beginning of last week closing stronger at current rate.
The CBN has in recent months activated multiple FX sources to increase dollar inflows, boost dollar access to manufacturers and retail end users and support naira recovery across markets.
From moves to improve diaspora remittances through new product development, the granting licences to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorised dealers and other players in the value chain.
Given that FX inflows to the economy are strategic in achieving monetary and fiscal policy stability, the CBN under Governor Olayemi Cardoso puts in efforts in attracting more inflows into the economy.
Diaspora remittances to Nigeria, estimated at $23 billion annually remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.
From stable naira to moderating inflation figures, the macroeconomic indicators have strengthened, creating room for stronger dollar inflows.
Analysts anticipate that FX inflows will continue to improve, supported by growing market confidence from domestic and offshore investors.
Nigeria is witnessing improving macroeconomic fundamentals as forex inflows from major sources into the Nigerian Foreign Exchange Market (NFEM) rose to a six-year high.
Recently, the Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said Nigeria’s economy is expected to recover further in the coming months while inflation is expected to ease to 23.15 per cent in June, with first quarter 2025 real Gross Domestic Product (GDP) growth projected at 3.4 per cent.
More inflows expected – Analysts
Analysts at Cordros Capital Group said the business expansion and inflows were driven by an improved macroeconomic outlook.
According to analysts, foreign exchange inflows will continue to improve, supported by growing market confidence.
They, however, warned that the lingering global trade uncertainties remain a downside risk to robust inflows from the foreign counterparts, potentially constraining growth in overall forex liquidity.
“Looking ahead, we expect sustained expansion in private sector activity, underpinned by improving macroeconomic fundamentals such as a more stable naira and moderating inflation. Nonetheless, tight financial conditions remain a potential headwind to broader economic performance in the near term,” Cordros Capital stated.
Global credit ratings agency, Moody’s Investors Service, recently upgraded Nigeria’s sovereign rating from Caa1 to B3, citing substantial gains from the government’s macroeconomic reforms.
Highlighting improvements in the country’s external and fiscal positions, Moody’s also adjusted Nigeria’s economic outlook from positive to stable.
Moody’s stated that the improved rating was based on “a more resilient fiscal position, stronger external accounts, and the government’s demonstrated commitment to macroeconomic and structural reforms.”
While remaining cautious, Moody’s was confident about the sustainability of the ongoing reforms.
It said: “The stable outlook reflects our expectations that external and fiscal improvements will decelerate but will not reverse entirely.”
The latest sovereign rating report came on the back of a report by Fitch Ratings, a leading global credit rating agency, which upgraded Nigeria’s rating from “B-“ to “B”. Fitch also declared the macroeconomic outlook “stable”.
“The upgrade reflects increased confidence in the government’s broad commitment to policy reforms implemented since its move to orthodox economic policies in June 2023, including exchange rate liberalisation, monetary policy tightening, and steps to end deficit monetisation and remove fuel subsidies.
“These have improved policy coherence and credibility and reduced economic distortions and near-term risks to macroeconomic stability, enhancing resilience in the context of persistent domestic challenges and heightened external risks,” Fitch stated in the April 2025 rating report.
According to Fitch, the “Stable Outlook” reflected the expectation that the macroeconomic policy stance would sustain improvements in the functioning of the forex market and support the move to lower inflation, though it would likely remain far higher than rating peers.
Fitch also anticipated “a continued reduction in external vulnerabilities through further easing of domestic foreign currency supply constraints, while renewed energy sector reforms should help sustain current account surpluses.”
‘Dollar liquidity now more balanced’
Director of Trading at Verto, Charlie Bird, said dollar liquidity dynamic is now more balanced, with foreign investors and airlines able to repatriate funds.
Speaking during Cordros Asset Management seminar titled: “The Naira Playbook”, he said Nigeria is now the darling of foreign investors because of improved dollar liquidity in the economy due to positive CBN’s reforms.
For instance, the CBN under Cardoso recently announced the introduction of two new financial products designed to serve Nigerians living abroad and attract more diaspora remittances.
These and other measures, including the granting licences, to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and enabling timely access to naira liquidity for International Money Transfer Operators (IMTOs).
Nigeria’s annual inflation rate eased to 23.71 per cent in April from 24.23 per cent in March 2025, the National Bureau of Statistics (NBS) said.
The statistics office said the April 2025 headline inflation rate showed a decrease of 0.52 per cent compared to the March 2025 headline inflation rate.
On a year-on-year basis, the headline inflation rate was 9.99 per cent lower than the rate recorded in April 2024 (33.69 per cent).
This, it said, shows that the headline inflation rate (year-on-year basis) decreased in April 2025 compared to the same month in the preceding year.
The NBS stated that on a month-on-month basis, the headline inflation rate in April 2025 was 1.86 per cent, which was 2.04 per cent lower than the rate recorded in March 2025 (3.90 per cent).
“This means that in April 2025, the rate of increase in the average price level is lower than the rate of increase in the average price level in March 2025,” it said.
Furthermore, food inflation rate in April 2025 was 21.26 per cent on a year-on-year basis. This, it said, was 19.27 per cent points lower compared to the rate recorded in April 2024 (40.53 per cent).
Nigeria has experienced a sharp increase in food prices in recent years. This trend worsened in 2023 following President Bola Tinubu’s removal of petrol subsidies and adopting a floating exchange rate for the naira.
The NBS said the contributions of items on the divisional year-on-year level to the increase in the headline index are food & non-alcoholic beverages (9.49 per cent), restaurants and accommodation services (3.06 per cent), transport (2.53 per cent), housing, water, electricity, gas & other fuel (2.00 per cent), education services (1.47 per cent), health (1.44 per cent), clothing & footwear (1.20 per cent).
Others are information and communication (0.78 per cent), personal care, social protection, and miscellaneous goods and services (0.78 per cent), furnishing, household equipment, and routine household maintenance (0.70 per cent), insurance and financial services (0.11 per cent), alcoholic beverage, tobacco and narcotics (0.09 per cent) and recreation, sport and culture (0.07 per cent).
The NBS said the Consumer Price Index (CPI) rose to 119.52 in April 2025, reflecting a 2.18-point increase from the preceding month.
The statistics office said the percentage change in the average CPI for the twelve months ending April 2025 over the average for the previous twelve-month period was 28.5 per cent, showing a 0.4 per cent increase compared to 28.1 per cent recorded in April 2024.
According to the NBS, significant decline in the food annual inflation figure is technically due to the change in the base year.
However, it said, on a month-on-month basis, the food inflation rate in April 2025 was 2.06 per cent, down by 0.12 per cent compared to March 2025 (2.18 per cent).
“The decrease can be attributed to the rate of decrease in the average prices of maize (corn) flour, wheat grain, dried okra, yam flour, soya beans, rice, bambara beans, brown beans, etc.,” the NBS said. (Daily trust)
