US Dollar Inflow into Nigeria Market Slumps by 5.7% to $3.2bn

US Dollar Inflow into Nigeria Market Slumps by 5.7% to $3.2bn

US dollar inflows into the Nigerian foreign exchange market (NFEM) declined by 5.7% in September, according to data cited by the investment firm Cordros Capital Limited.

Despite the slowdown, the naira was able to breach the psychological barrier for the first time since Q1 over elevated offshore investors’ confidence in Nigerian markets.

Both the equities and fixed income markets attracted offshore investors’ attention, with US dollar flows supported by activities of foreign direct investors.

According to data from FMDQ, total inflows into the Nigerian Foreign Exchange Market (NFEM) declined by 5.7% to USD3.18 billion in September from USD3.37 billion, primarily reflecting declines in inflows from local sources. 

The Naira traded largely stable in September, supported by improved FX inflows and CBN interventions. Trading opened within the ₦1,531–₦1,522/USD range, underpinned by consistent dollar supply from foreign portfolio investors, exporters, and the CBN’s $150 million intervention.

Furthermore, the CBN’s introduction of a 75% cash reserve ratio on non-TSA deposits, alongside sustained inflows from FAAC disbursements and remittances, helped absorb demand pressures and tighten Naira liquidity.

Consequently, the Naira appreciated by ₦44.57 or 2.91% month on month (m/m), from August’s close of ₦1,531.57/USD. External reserves also strengthened by $1.08 billion m/m to $42.35 billion, providing a firmer buffer for market stability.

FMDQ data cited revealed that inflows from local sources dipped by 32.4% m/m to USD1.42 billion from USD2.10 billion in August, due to declines across the CBN, non-bank corporates and Exporters/Importers segments despite the higher accretion recorded in the individuals. 

The CBN FX supply declined by 54.4% last month, and non-bank corporate fx inflows also went down by 48.4% while exporters dipped by 3.2%. On the other hand, fx inflows from individuals rose by 97.3%.

On the other hand, inflows from foreign sources increased by 38.9% m/m to USD1.75 billion from USD1.26 billion. The market also witnessed increase from FDIs, up by 12.2ppts m/m and FPIs rose by +22.3% m/m.

These inflows were enough to offset the decline in the other corporates, down by 16.9% m/m.  Analysts said 25.4% increases in fixed income and equity investment boosts of +1.3% m/m in the sub-segments drove the improvement in the inflows from foreign portfolio investors.

“In the near term, we expect foreign exchange inflows from both local and foreign sources to remain strong, surpassing 2024 levels versus USD2.51 billion in 2024, driven by increased market confidence and still attractive carry trade opportunities,” Cordros Capital Limited said.

In a related development, credit to the private sector declined further in June, falling by 2.17%, or ₦1.69 trillion, to ₦76.14 trillion from ₦77.83 trillion in May, and down 2.42% from ₦78.02 trillion in December 2024.

The contraction reflects banks’ cautious lending posture amid a tight monetary environment and elevated policy rates. Meanwhile, broad money supply (M3) stood higher at ₦117.50 trillion (+3.65%) compared to the 2024 closing value of ₦113.36 trillion, supported by a 27.47% increase in net foreign assets.

This expansion has helped sustain improved external liquidity and contributed to the recent stability of the naira. #US Dollar Inflow into Nigeria Market Slumps by 5.7% to $3.2bn Fitch Affirms Nigeria at ‘B’ with Stable Outlook