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By Chinwendu Obienyi
Nigeria’s foreign exchange (FX) market recorded a significant improvement in liquidity in May 2026, with total FX inflows rising by 31 per cent month-on-month (m/m) to $3.7 billion, driven largely by stronger export earnings and sustained foreign portfolio investment (FPI) inflows.
According to data from FMDQ, the increase represents a notable recovery after two consecutive months of declining inflows, providing support for market liquidity and helping to ease pressure on the naira.
However, despite the monthly rebound, total FX supply remained substantially lower than levels recorded a year earlier, declining by 44 per cent year-on-year (y/y), highlighting the continued challenges facing the country’s foreign exchange market.
The data further suggest that domestic sources played a crucial role in sustaining FX liquidity amid heightened geopolitical tensions in the Middle East and growing uncertainty in global financial markets.
Specifically, domestic inflows climbed sharply to $2.1 billion in May from $1.2 billion in April, accounting for about 56 per cent of total FX supply during the month. Stronger contribution from local sources helped compensate for constrained foreign participation and reduced volatility pressures in the currency market.
Export proceeds emerged as the biggest contributor to domestic FX supply. Inflows from exporters more than doubled, increasing by 107 per cent m/m to $1.4 billion and accounting for roughly 68 per cent of total domestic inflows.
The surge in export earnings was largely attributed to stronger oil export receipts, supported by elevated crude oil prices in the international market following supply disruptions linked to ongoing tensions in the Middle East.
In addition to export proceeds, the Central Bank of Nigeria (CBN) continued its interventions in the FX market. The apex bank supplied approximately $125 million to the market in May, up from $104 million in April.
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Corporate inflows also strengthened during the period, rising to $520 million from $415 million in the preceding month, while inflows from individual sources stood at $13.8 million, slightly below the $14.8 million recorded in April.
Foreign inflows remained relatively resilient despite global economic uncertainties and tighter financial conditions across major economies. Total foreign inflows increased marginally to $1.7 billion in May from $1.6 billion in the previous month.
Foreign portfolio investments (FPIs) continued to dominate foreign FX supply, accounting for about 98 per cent of total foreign inflows. FPI inflows rose to $1.62 billion in May, compared with $1.57 billion in April and $1.13 billion recorded in the corresponding period last year.
A closer look at the composition of foreign investments showed that fixed-income securities attracted the largest share of inflows, with investors committing approximately $1.55 billion during the month.
The strong interest in Nigerian fixed-income assets reflects the attractiveness of the country’s high-yield environment, which continues to offer profitable carry-trade opportunities for foreign investors despite lingering macroeconomic risks.
Market analysts believe that FX supply conditions are likely to remain supportive in the near term.
Analysts at Quest Merchant Bank, said that continued growth in export receipts, coupled with sustained foreign portfolio inflows and periodic interventions by the CBN, is expected to help preserve liquidity in the FX market and support relative stability of the naira, even as external risks and global market uncertainties persist.
“Looking ahead, we expect FX supply conditions to remain adequate to support relative naira stability, as domestic inflows continue to support market liquidity, despite persistent external headwinds”, they said.
