Nigeria’s foreign exchange (FX) market has experienced a dramatic boost in liquidity, with daily turnover approaching $500 million—a nearly five-fold increase. This surge is credited to a series of bold reforms introduced by the Central Bank of Nigeria (CBN), including the liberalisation of the exchange rate and the implementation of the Electronic Foreign Exchange Market System (EFEMS) in December 2024. Analysts say the shift away from a rigid FX regime has instilled renewed confidence among investors.
Before the reforms, Nigeria operated a fixed exchange rate system that relied heavily on CBN interventions, depleting foreign reserves and stifling natural market activity. FX turnover hovered around $100–$150 million daily, with over 40% of that driven by the CBN. The artificial pricing eventually led to a collapse of the naira, which lost more than 70% of its value. The new market-driven approach now allows pricing to be determined by demand and supply, easing pressure on reserves.
Since the reforms, the naira has shown signs of recovery as foreign investors re-enter the market. The CBN’s reduced direct intervention—now under 10% of market activity—marks a stark departure from previous practices. The reforms have particularly gained momentum under Governor Olayemi Cardoso’s leadership, who has focused on rebuilding credibility and encouraging market participation.
The return of the open market operation (OMO) auctions has also attracted significant foreign portfolio investments. The most recent OMO auction in April saw over N1 trillion raised, with a 102% oversubscription rate. Analysts believe this reflects investor expectations of continued high interest rates and optimism about long-term returns in Nigeria’s high-yield environment.
Data from the CBN indicates that foreign capital inflows reached a two-year high of $2.06 billion at the start of 2025. This upswing is attributed to the CBN’s aggressive monetary policy stance, which included raising the benchmark interest rate by 875 basis points to 27.5% to tame inflation. Experts believe these combined efforts are revitalising Nigeria’s FX landscape and positioning it for sustainable growth.