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Nigeria’s demand for foreign exchange (FX) has risen sharply as dollar availability improves, but the increase is yet to translate into a similar rise in imports of machinery, raw materials and other goods needed to expand production.
Latest data from the Central Bank of Nigeria (CBN) showed that total sectoral FX utilisation rose by 61.9 per cent year-on-year to $34.59 billion in the first half of 2026, from $21.37 billion in the same period of 2025.
The figure is the highest recorded in the CBN’s available data from 2010 to 2026.
However, the sharp increase in FX utilisation was driven mainly by invisible transactions, while the use of foreign exchange for physical imports remained largely flat.
Invisible transactions, which cover services and other payments that do not involve the direct importation of physical goods, more than doubled to $11.4 billion from $4.5 billion a year earlier. They accounted for about 70 per cent of total FX utilisation.
Financial services were the biggest contributor to the increase, with FX utilisation in the sector rising by 117 per cent year-on-year to $9 billion.
The monthly figures showed that demand for FX in the sector rose steadily from $1.78 billion in January to $2.78 billion in February and $4.42 billion in March 2026.
The March figure was more than twice the $2.13 billion recorded in March 2025, suggesting that improved access to dollars is allowing more financial transactions to move through the official market.
Business services also recorded significant growth, with FX utilisation rising to $1.2 billion in the first quarter of 2026, compared with $223.6 million in the corresponding period of 2025.
Within the quarter, utilisation increased from $247.9 million in January to $471 million in March, pointing to stronger demand for internationally sourced services as dollar liquidity improves.
The picture was different for physical imports.
FX utilisation for merchandise imports stood at about $4.9 billion, representing only a marginal 0.2 per cent increase from the previous year.
More importantly, FX utilisation by the industrial sector fell by 20 per cent to $1.8 billion. The decline points to weaker demand for imported raw materials, machinery and equipment despite the improved availability of foreign exchange.
This divergence is raising fresh questions about whether Nigeria’s FX reforms are yet translating into stronger economic activity, particularly investment and industrial production.
The concern is that improved dollar supply may be releasing pent-up demand for financial and service-related transactions without yet producing a significant increase in imports that directly support production.
Chief Executive Officer of Cowry Asset Management Ltd, Johnson Chukwu, said the increase in FX utilisation was not entirely negative, noting that some categories of merchandise imports had also recorded stronger activity.
He pointed out that utilisation for manufactured products increased to $1.1 billion from $477.9 million, while transport products rose to $295 million from $142.8 million.
Chukwu said the broader trend showed that FX market activity had been building steadily rather than being limited to the first quarter.
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“Total utilisation increased from $2.92 billion in January 2025 to $3.58 billion in February and $3.77 billion in March, before rising to $4.84 billion, $4.72 billion and $6.70 billion in the corresponding months of 2026.
“March therefore recorded the highest monthly utilisation in the available series, providing further evidence of increased activity in the FX market. Importantly, the rise in FX utilisation should be viewed alongside the improvement in FX liquidity and reserve buffers,” Chukwu explained.
According to him, greater availability of foreign currency, combined with relatively stable exchange-rate conditions, has encouraged businesses and other market participants to complete transactions that may previously have been postponed.
He said the increase in FX utilisation should therefore not necessarily be interpreted as a return of the kind of FX pressure witnessed in the past.
“Greater availability of foreign currency, together with relatively stable exchange-rate conditions, has likely encouraged businesses and other market participants to execute transactions that may previously have been delayed,” he said.
“This makes the increase in utilisation less a sign of renewed FX stress and more an indication of greater market activity as access to foreign currency improves.”
Chukwu, however, said the sustainability of the recovery would depend largely on the continued supply of foreign exchange.
“Continued CBN reforms, stronger reserve buffers and improved market liquidity should support further growth in formal FX transactions. At the same time, the composition of demand will be worth monitoring, particularly whether stronger utilisation increasingly extends towards industrial inputs and capital goods, which would provide a more direct indication of improving productive activity,” he said.
He added that the overall picture remained positive, but warned that the quality of FX demand would be important in determining whether the recovery was benefiting the wider economy.
“Overall, the Q1 2026 numbers present a reasonably constructive picture: FX demand is recovering, but so too is the market’s capacity to accommodate it. Sustaining this balance will be important for maintaining naira stability, strengthening confidence and supporting a more predictable operating environment for businesses,” Chukwu said.
He projected that FX utilisation would remain high through the year as businesses gain greater confidence from improved exchange-rate stability and better access to the formal FX market.
“We expect FX utilisation to remain elevated throughout the year as exchange-rate stability improves visibility for businesses, CBN reforms deepen the formal FX market and stronger reserve buffers support liquidity,” he said.
“However, sustained naira stability will ultimately depend on the durability of FX supply, including non-oil inflows, portfolio flows and export receipts, relative to this increasingly visible demand.”
Analysts at Cordros Research also expect physical imports to remain under pressure, partly because of the increasing availability of locally refined petroleum products.
“We also expect FX liquidity conditions to remain broadly stable in the near term, supported by improving macroeconomic conditions and continued CBN measures to support FX market liquidity. This should provide greater scope for increased FX utilisation across sectors,” the analysts said.
The latest figures suggest that Nigeria’s FX market is becoming more active as dollar liquidity improves, but the next major test will be whether this increased activity translates into more investment, imports of production equipment and stronger industrial output.
For policymakers, the challenge will be to maintain sufficient FX supply while ensuring that the benefits of improved liquidity extend beyond financial transactions and services to the productive sectors of the economy.
