Nigeria’s foreign exchange market witnessed a significant slowdown in August, with inflows into the Nigerian Foreign Exchange Market (NFEM) falling by 26.9 percent month-on-month to $2.80 billion, down from $3.83 billion in July. Fresh data from FMDQ shows that both offshore and local players reduced their activities, raising fresh concerns over liquidity and policy stability in Africa’s largest economy.
Foreign inflows bore the biggest hit, plunging to a four-month low at $1.06 billion—just 38 percent of the total. The sharp decline was driven by Foreign Portfolio Investors (FPIs), whose participation dropped 65.8 percent, alongside a 25.2 percent fall in Foreign Direct Investment (FDI). Analysts say this signals offshore investors’ growing caution towards emerging markets, particularly amid Nigeria’s FX uncertainties.
Yet, not all participants pulled back. Inflows from multinational and corporate entities climbed by an impressive 165.5 percent, showing that some global businesses still see opportunity despite the broader risk-off sentiment. On the local side, however, domestic inflows dropped 17.9 percent to $1.74 billion. Exporters, importers, and non-bank corporates were the main culprits, contracting by more than 30 percent each.
Interestingly, support came from unexpected quarters. Inflows from private individuals surged over 400 percent, while the Central Bank of Nigeria (CBN) more than doubled its supply, increasing by 118.9 percent month-on-month. Market watchers believe the apex bank’s intervention aimed to stabilize liquidity and restore investor confidence following recent bouts of naira volatility.
Looking ahead, experts remain cautiously optimistic. They argue that while August’s pullback highlights short-term volatility, Nigeria still offers attractive yields for carry-trade seekers as global central banks ease rates. However, they warn that sustained inflows will depend heavily on consistent policies, liquidity assurance, and transparency. With reserves fragile and the naira under pressure, September’s performance could prove decisive in shaping investor sentiment for the rest of 2025.
Source: The sun