FX inflows hit $112bn in 12 months – Report

Nigeria recorded foreign exchange inflows of $112 billion within a 12-month period as interventions by the Central Bank of Nigeria (CBN) and fiscal authorities continued to strengthen investor confidence and improve liquidity in the foreign exchange market, according to a report by the Financial Markets Dealers Association (FMDA). The report showed that autonomous inflows, including […]

Nigeria recorded foreign exchange inflows of $112 billion within a 12-month period as interventions by the Central Bank of Nigeria (CBN) and fiscal authorities continued to strengthen investor confidence and improve liquidity in the foreign exchange market, according to a report by the Financial Markets Dealers Association (FMDA).

The report showed that autonomous inflows, including diaspora remittances, foreign portfolio investments, export proceeds and private capital flows, accounted for the largest share of the inflows, underscoring growing confidence in the Nigerian economy following sweeping foreign exchange reforms.

The development marks a major turnaround for the country’s FX market, which had struggled with severe liquidity shortages, exchange rate distortions and a backlog of unmet foreign exchange obligations running into billions of dollars.

Analysts said the latest figures indicate that reforms introduced by the CBN under Governor Olayemi Cardoso are beginning to restore market confidence and reposition the economy for stronger foreign capital inflows.

According to the FMDA report, autonomous inflows contributed 64.94 per cent of total FX inflows during the period, signalling a major shift from dependence on central bank intervention to stronger private-sector participation in the market.

The report showed that autonomous inflows rose to $72.91 billion during the review period, compared with $59.29 billion recorded previously and $41.80 billion before the reforms gathered momentum.

The surge in private-sector inflows reflects improved confidence among international investors, Nigerians in the diaspora and exporters who had previously remained cautious because of uncertainty in the foreign exchange market.

The report also revealed that the CBN’s direct FX sales increased significantly within the period, rising by 126.37 per cent to $8.94 billion from $3.95 billion recorded earlier.

Market analysts said the increase in inflows from autonomous sources demonstrated that confidence in the Nigerian economy was gradually returning after years of uncertainty surrounding exchange rate management and foreign exchange liquidity.

The recent improvements followed a series of reforms introduced by the apex bank after Cardoso assumed office in October 2023.

At the time, Nigeria’s FX market was facing severe pressure, with multiple exchange rates encouraging arbitrage, discouraging investment and creating uncertainty for businesses and foreign investors.

In addition, the country had accumulated over $7 billion in outstanding foreign exchange obligations owed to foreign companies, airlines and investors unable to access their funds.

The backlog became a major credibility issue for the Nigerian economy, with many foreign businesses expressing concerns over their inability to repatriate profits and settle legitimate obligations.

To address the crisis, the CBN initiated a forensic audit of the outstanding claims before proceeding with payments to verified beneficiaries.

Cardoso said the decision to clear the backlog was necessary to restore credibility and reassure investors that Nigeria remained committed to honouring its obligations.

According to him, rebuilding trust was essential to attracting investment and stabilising the economy.

“Credibility is at the heart of any central bank. If people do not trust the system, they will not invest in the economy,” he said while explaining the rationale behind the policy.

The CBN governor acknowledged that the process involved difficult decisions and significant financial sacrifices, but insisted that restoring confidence in the market was more important for long-term economic stability.

Beyond clearing the FX backlog, the apex bank also moved to unify exchange rates in a bid to eliminate distortions and improve transparency in the market.

Before the reforms, Nigeria operated multiple exchange rate windows, a system that created opportunities for arbitrage and discouraged genuine investment inflows.

The exchange rate unification policy was designed to allow market forces play a greater role in determining the value of the naira while reducing speculative activities in the FX market.

The CBN also introduced an electronic FX matching system aimed at improving transparency, efficiency and liquidity management within the market.

Analysts believe these measures have contributed significantly to the rebound in investor confidence and the sharp increase in FX inflows.

According to the FMDA report, total FX utilisation reached $47.17 billion during the period, reflecting increased economic activities and rising demand for foreign exchange across different sectors of the economy.

The report showed that invisible transactions emerged as the largest source of FX demand, surpassing merchandise imports for the first time.

Invisible-related FX utilisation rose sharply to $27.27 billion from $11.10 billion recorded previously.

Financial services accounted for the largest share of the invisible transactions at $21.22 billion, reflecting increased cross-border financial activities and payments.

The report explained that invisible transactions covered activities such as debt servicing, airline operations, shipping services, technology payments, expatriate services and other cross-border financial obligations.

Import-related FX demand also increased from $15.54 billion to $19.90 billion, while the industrial sector remained the largest merchandise-related source of FX demand at $8.43 billion.

Oil-sector FX demand nearly doubled within the period, rising from $2.26 billion to $4.98 billion.

Business services demand also increased significantly from $702.38 million to $3.48 billion, indicating stronger corporate and international commercial activities.

However, educational services demand declined sharply from $396.40 million to $55.16 million during the period under review.

Economic experts said the sharp rise in invisible transactions highlighted Nigeria’s increasing integration with global service markets and cross-border financial systems.

The reforms introduced by the CBN have also attracted positive attention from global credit rating agencies.

Fitch Ratings recently revised Nigeria’s outlook from negative to stable, citing improvements in policy credibility, exchange rate management and macroeconomic reforms.

The agency noted that exchange rate liberalisation, tighter monetary policy and reduced economic distortions had improved resilience within the Nigerian economy.

S&P Global Ratings also upgraded Nigeria’s outlook from stable to positive while affirming the country’s sovereign ratings at “B-/B”.

According to the agency, ongoing fiscal, monetary and economic reforms are expected to support stronger economic stability over the medium term.

Moody’s similarly upgraded Nigeria’s credit rating from “Caa1” to “B3”, citing notable improvements in the country’s external and fiscal positions.

The rating agencies specifically pointed to foreign exchange reforms, monetary tightening and efforts to reduce deficit financing as major factors behind the improved outlook on the Nigerian economy.

President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, described the positive ratings as evidence that the reforms were beginning to produce results.

According to him, the measures introduced by the CBN have helped stabilise the exchange rate and improve confidence in the FX market.

Chief Executive Officer of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, also said the increase in autonomous inflows reflected renewed confidence among foreign investors and Nigerians in the diaspora.

He explained that inflows from remittances, foreign portfolio investments and non-oil exports had improved significantly because investors now have greater confidence in the transparency of the market.

Yusuf noted that the increase in FX inflows was not solely due to higher intervention by the CBN, but mainly because of stronger supply from private-sector sources.

According to him, there were periods when the CBN itself purchased foreign exchange from the market because liquidity conditions had improved considerably.

Speaking on the surge in invisible transactions, Yusuf said the increase reflected growing international commercial activities involving Nigerian businesses and institutions.

He explained that foreign debt repayments, airline operations, shipping services and expatriate-related payments all contributed to the higher invisible-related demand.

Chief Executive Officer of ECL Asset Management, Charles Fakrogha, also linked the growth in FX inflows to increased activities within the import and export sectors.

According to him, many Nigerian companies depend on imported raw materials while others export finished products, creating stronger foreign exchange activities in the economy.

However, Fakrogha expressed concern that financial services accounted for a large share of FX utilisation while the real sector continued to face funding challenges.

He warned that many financial institutions preferred investing in treasury bills and other low-risk instruments instead of supporting productive sectors through lending.

He argued that while the financial sector was benefiting from improved liquidity and stability, more attention should be given to manufacturing and industrial production.

Fakrogha nevertheless praised the exchange rate unification policy, describing it as one of the most important reforms introduced by the CBN.

According to him, the elimination of multiple exchange rates reduced speculative activities and helped stabilise the naira.

Chief Executive Officer of Globalview Capital, Aruna Kebira, said stronger regulations and recapitalisation efforts in the banking and financial sectors had also contributed to rising investor confidence.

He noted that recapitalisation exercises involving banks, insurance firms and pension fund administrators had strengthened the financial system and attracted more local and foreign investments.

Kebira added that Nigerians in the diaspora were increasingly showing interest in the domestic capital market because of improved confidence in economic reforms and policy direction.

According to him, the strong performance of the Nigerian stock market reflects growing investor participation and renewed confidence in the economy.

He also disclosed that many diaspora investors were already positioning themselves for future investment opportunities, including the proposed Initial Public Offering (IPO) of Dangote Refinery.

Analysts, however, cautioned that sustaining the gains from the reforms would require policy consistency, stronger non-oil exports, lower inflation and increased productivity across the economy.

They stressed the importance of maintaining transparency in the FX market, improving domestic production and ensuring adequate liquidity to preserve investor confidence and support long-term macroeconomic stability.

 

The analysts also noted that while the recent inflows represent a positive development for the economy, Nigeria must continue implementing structural reforms capable of reducing dependence on oil revenues and attracting sustainable foreign investment.

 

With investor confidence gradually improving and autonomous inflows strengthening, stakeholders believe the reforms introduced by the CBN could provide the foundation for a more stable and transparent foreign exchange market in the years ahead.