Forex Inflows Drop 20.9% in July Despite Market Optimism, Naira Shows Modest Gains

Foreign exchange inflows into the Nigerian Foreign Exchange Market (NFEM) declined sharply by 20.9% in July 2025, marking the second consecutive month of decline despite analysts’ expectations of robust market liquidity. This drop follows a 28.1% decline recorded in June, even as Nigeria’s 30-day moving average foreign reserves continued to rise, gaining $593.75 million week-on-week to reach $39.36 billion by July 30, according to the Central Bank of Nigeria (CBN).

Total inflows into the market dipped to $3.83 billion in July from $4.84 billion in June, with foreign sources being the major contributor to the decline. Foreign inflows fell by 35.6% to $1.75 billion, accounting for 45.8% of the total. The steepest drop occurred in Foreign Direct Investment (FDI), which plunged 79.8%, followed by corporate inflows and Foreign Portfolio Investments (FPIs), which declined 60.1% and 34.8% respectively.

Domestic sources made up 54.2% of the total inflows but also experienced a slight dip of 1.9% to $2.07 billion. The marginal decline stemmed primarily from a 30.1% fall in Exporters/Importers’ contributions. However, this was offset by significant increases in individual inflows (up 117.5%), CBN inflows (up 77.8%), and non-bank corporate inflows (up 5.4%).

Despite the downward trend in inflows, market analysts remain optimistic about future performance. Cordros Research expressed confidence that forex inflows will surpass the 2024 average of $2.51 billion, attributing this to stronger market sentiment, attractive yields, and reduced speculative demand for the naira. Similarly, Cowry Asset Management projects relative stability in both official and parallel exchange windows, though it flagged seasonal pressures from increased travel demand.

Meanwhile, the naira appreciated slightly by 0.06% to close at N1,533.74/$ at the official window, supported by ongoing CBN interventions. In the forwards market, the currency strengthened across all tenors, with gains ranging from 0.6% on 1-month contracts to 4.4% on 1-year contracts, signaling sustained investor confidence in the local currency’s outlook.

Source: Leadership