FX Market Attracted $3.83bn Inflows in July on Strong Local Support

Nume Ekeghe

Nigerian Foreign Exchange Market (NFEM) recorded a total of $3.83 billion in inflows in July, as strong contributions from local sources, particularly individuals, non-bank corporates, and the Central Bank of Nigeria (CBN), helped sustain momentum in the market.

According to the latest figures from FMDQ, domestic participants accounted for 54.2 per cent of the total inflows, reflecting resilient confidence in the FX market despite prevailing macroeconomic challenges. Notably, inflows from individuals rose by a significant 117.5 per cent month-on-month (m/m), while the CBN increased its contribution by 77.8 per cent. Non-bank corporates also posted a moderate 5.4 per cent uptick in inflows.

Analysts believe the strong domestic showing helped counterbalance a dip in inflows from foreign sources, which stood at $1.75 billion—down 35.6 per cent from the previous month. Foreign investors accounted for 45.8 per cent of total inflows, with lower activity recorded across Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), and other corporate channels. FDI fell by 79.8 per cent, FPIs declined 34.8 per cent, and other corporates dropped 60.1 per cent.

Meanwhile, inflows from the Exporters and Importers (I&E) window, a key driver of market liquidity, moderated by 30.1 per cent in July. However, the overall impact of this decline was offset by renewed local interest and increased support from monetary authorities.

Cordros Securities in a report stated: “According to the data from FMDQ, total inflows into the Nigerian Foreign Exchange Market (NFEM) declined by 20.9 per cent m/m to $3.83 billion in July, June: $4.84 billion), primarily driven by declines in inflows from both foreign, 45.8 perof total inflows and local sources, 54.2 per cent of total inflows. 

“Specifically, inflows from foreign sources dropped by 35.6 per cent m/m to $1.75 billion from $2.73 billion in June following declines in inflows across FDIs, -79.8% m/m, other corporates (-60.1 per cent m/m and FPIs -34.8 per cent m/m segments. At the same time, inflows from local sources marginally declined by 1.9 per cent m/m to $2.07 billion primarily due to the decline in the Exporters/Importers -30.1 per cent m/m) segment. Inflows from individuals (+117.5 per cent m/m), CBN (+77.8 per cent m/m), and non-bank corporates (+5.4 per cent m/m) segments recorded higher accretions.”

In the short term, analysts project that FX inflows—both local and foreign—will continue to improve and surpass 2024 levels, which averaged $2.51 billion monthly. The outlook is supported by relatively attractive naira yields, increased market transparency, and improving macroeconomic fundamentals.

They further stated: “In the near term, we expect foreign exchange inflows from both local and foreign sources to remain robust surpassing 2024 levels (2024FY average: $2.51 billion) driven by improving market confidence and still-attractive naira yields for foreign portfolio investors (FPIs).”