Investor Caution Slashes July FX Inflows by 21% Amid Global, Local Uncertainty

Foreign exchange inflows into the Nigerian Foreign Exchange Market (NFEM) fell by 20.9% in July 2025 to $3.83 billion, down from $4.84 billion in June. According to FMDQ data, the decline was driven largely by a sharp drop in foreign inflows, which made up 45.8% of total transactions, while local inflows comprised 54.2%. The decrease has raised concerns over weakening investor confidence amid global financial uncertainty and domestic market challenges.

Foreign inflows plummeted by 35.6% to $1.75 billion, with all key investment categories—FDIs, FPIs, and corporate inflows—posting notable declines. FDIs saw the steepest fall of 79.8%, signaling weakened long-term investor trust in Nigeria’s macroeconomic fundamentals. FPIs also dropped by 34.8%, influenced by global interest rate dynamics and local currency concerns, while other corporate inflows dropped by 60.1%.

Local sources of FX inflows saw a marginal decline of 1.9% to $2.07 billion. The slight dip was mainly due to a 30.1% fall in contributions from exporters and importers. However, individual inflows surged by 117.5%, buoyed by diaspora remittances and personal transfers. The Central Bank of Nigeria (CBN) also stepped up, increasing its FX supply by 77.8%, while non-bank corporates showed a modest rise of 5.4%.

Analysts attribute the downturn in foreign inflows to profit-taking by FPIs, global market volatility, and Nigeria’s still-evolving FX policy environment. Uncertainties surrounding interest rates and policy implementation continue to weigh on investor sentiment. Despite these concerns, the July figure remains significantly above the 2024 average of $2.51 billion, indicating improved momentum since the currency regime liberalization.

Looking forward, experts are cautiously optimistic, expecting continued robust inflows supported by elevated naira yields and CBN-led reforms. Still, persistent inflation, fiscal imbalances, and a lack of structural reforms—particularly in business regulation and energy access—pose risks. The direction of CBN policy on interest rates and FX management will be closely watched as investors seek clarity in an increasingly complex macroeconomic environment.

Source: The sun