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By Chinwendu Obienyi
Nigeria recorded a sharp rebound in foreign-exchange inflows in October as both foreign and domestic investors increased participation in the market, supported by improving sentiment and expectations of monetary policy easing globally.
Specifically, total inflows into the Nigerian Foreign Exchange Market (NFEM) jumped 62.2 per cent month-on-month (m/m) to $5.15 billion, the highest level since May, according to data from FMDQ.
The turnaround was driven primarily by foreign investors, whose inflows rose 89.7 per cent to $3.32 billion, accounting for 64.5 per cent of total market liquidity. The gain was anchored by a strong return of portfolio investors, with Foreign Portfolio Investment (FPI) inflows surging 120.7 per cent from September levels.
Furthermore, higher receipts from the “Other Corporates’’ segment also supported the performance, rising 30.5 per cent month-on-month. These increases were sufficient to offset a 25.5 per cent contraction in Foreign Direct Investment inflows, which remained comparatively subdued.
The domestic side of the market also strengthened, though at a more moderate pace. Inflows from local participants rose 28.4 per cent month-on-month, contributing 35.5 per cent of total FX liquidity. The expansion was led by an extraordinary 370.6 per cent jump in individual inflows, one of the sharpest monthly increases recorded this year.
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Corporates and exporters also increased FX supply, with inflows rising 30.8 per cent and 7.2 per cent, respectively. However, the Central Bank of Nigeria’s (CBN) inflows fell 59.6 per cent, reflecting the bank’s ongoing shift toward reduced direct intervention and greater reliance on market-driven price discovery.
The strong rebound in October inflows comes as Nigeria continues efforts to attract foreign capital and stabilize its FX market following months of volatility. Authorities have implemented a series of measures aimed at improving transparency and liquidity, including easing restrictions on the official window, clearing verified FX backlogs, and allowing greater rate flexibility to draw in investment flows.
Analysts say the combination of improving domestic reforms and a more favorable global environment has begun to unlock risk appetite for Nigerian assets. With major central banks from the Federal Reserve to the European Central Bank, signaling the possibility of easing cycles, yield-seeking investors have intensified their search for attractive carry-trade opportunities.
Nigeria’s elevated interest-rate environment, coupled with gradual improvements in FX market functioning, has helped position the country as a beneficiary of that shift.
Looking ahead, inflows are expected to remain strong and exceed the 2024 year-to-date average of $2.51 billion. Sustained market confidence, ongoing portfolio rebalancing by foreign investors and further stability in the policy environment are seen as key drivers.
While risks remain, particularly related to inflation dynamics and currency volatility, October’s performance marks a notable step toward restoring resilience in Nigeria’s FX market.
