Dollar Inflows Into Nigeria’s FX Market Drop 21% as Foreign Investors Pull Back
U.S. dollar inflows into Nigeria’s official foreign exchange (FX) market fell sharply last week, signaling increased caution among foreign investors. According to data from the Nigeria Foreign Exchange Market (NFEM), total inflows dropped 20.67% week on week to US$593.7 million, down from US$748.4 million the previous week. The decline comes despite continued interventions by the Central Bank of Nigeria (CBN) to stabilize the naira.
Foreign portfolio and direct investments were the hardest hit, highlighting persistent concerns about Nigeria’s economic and policy environment. Foreign portfolio inflows tumbled nearly 73% to US$46 million, while foreign direct investment plunged 82% to just US$7 million, according to a report by Coronation Merchant Bank. This sharp drop means foreign sources accounted for only 17% of total FX inflows, underlining global investors’ continued wariness even after recent FX reforms.
Local participants, led by individual investors and the CBN, dominated the FX market, supplying nearly 83% of total inflows. Individuals contributed US$165.1 million, the CBN added US$128 million, and exporters and importers accounted for US$115.6 million. Analysts say this heavy reliance on domestic sources emphasizes Nigeria’s dependence on central bank intervention and local FX recycling rather than sustainable foreign investment.
The naira showed mixed performance at the start of 2026. At the official window, it gained 0.88% week on week, closing at N1,430.85/US$, supported by continued CBN dollar sales. However, in the parallel market, the currency weakened to around N1,490/US$, reflecting ongoing demand pressures outside the formal market. Meanwhile, Nigeria’s external reserves rose slightly to US$45.5 billion, aided by the CBN’s active defense of the currency using systems like BMatch and EFEMS to improve transparency and market efficiency.
Looking ahead, analysts project the naira to trade within N1,400–N1,500/US$ in 2026, supported by higher oil production and export-driven FX liquidity. However, durable exchange-rate stability will depend on consistent policies, stronger investor confidence, fiscal discipline, and a transparent, market-driven FX framework capable of attracting long-term foreign capital. Until these factors improve, Nigeria’s FX market is likely to remain heavily reliant on local liquidity and central bank interventions.
source: nairametrics