Follow Us on Google
Nigeria’s foreign exchange market may likely continue to face dollar supply constraints through the end of the year, as seasonal import demand and increased business activity ahead of the Christmas and New Year festivities put additional pressure on available foreign exchange liquidity.
Despite the Central Bank of Nigeria (CBN) injecting approximately $1.98 billion through interventions aimed at meeting the foreign currency requirements of importers and businesses last month, it failed to satisfy the heavy demand in the FX market.
Data from five intervention exercises conducted during the month under review showed that the apex bank successfully met demand on only two occasions, while it failed to satisfy requests on the remaining three. This translates into a 40 per cent success rate despite the substantial supply provided by the central bank.
The interventions amounted to $430.6 million, $200 million, $950 million, $100 million and $300 million, respectively, bringing total dollar sales to $1.981 billion.
Daily Sun gathered that the recurring inability to meet demand usually comes as businesses typically increase foreign currency requirements towards the final quarter of the year, when importers begin stocking up on goods ahead of the Christmas and New Year festivities.
The seasonal increase in import activity could be adding to existing pressure on the foreign exchange market, as businesses seek dollars to finance shipments of food products, beverages, electronics, clothing, household goods and manufacturing inputs.
Importers often advance their purchases ahead of the festive season to ensure adequate inventory and avoid potential disruptions to supply chains. This can result in increased demand for foreign exchange at a time when market liquidity may already be constrained.
Beyond seasonal demand, Nigeria’s structural dependence on imported goods continues to expose the foreign exchange market to sustained dollar requirements. Manufacturers and businesses reliant on imported raw materials, machinery and intermediate products also compete for available foreign currency.
The pressure is not limited to merchandise imports. Demand for foreign exchange to settle service-related obligations, international financial transactions and investment repatriation can further tighten available dollar liquidity.
Furthermore, foreign portfolio investors seeking to convert naira proceeds into dollars and repatriate capital may also contribute to demand pressures, particularly during periods of profit-taking or portfolio rebalancing.
While Nigeria’s external reserves provide an important buffer against foreign exchange pressures, the availability of reserves does not necessarily translate into immediate dollar liquidity in the official market. The timing and volume of foreign exchange inflows, particularly from crude oil exports, foreign investments and diaspora remittances, remain important determinants of market supply.
Other News
According to the CBN Governor, Olayemi Cardoso, interventions are intended to bridge the gap between available supply and legitimate demand, particularly for businesses requiring foreign currency to finance international trade and other eligible transactions.
Cardoso revealed that daily FX turnover was roughly $100 million before he took over as governor.
He said, “Today, average daily turnover is around $550 million, and on some occasions it has reached as much as $1 billion in a single day.
Our objective is to achieve that level of liquidity consistently, and we are confident that ongoing reforms and measures contained in the new FX Manual will help us get there.As the market deepens and liquidity improves, the need for central bank intervention naturally diminishes. A well-functioning market should be able to determine prices through willing-buyer, willing-seller transactions. In fact, relative to total market turnover in 2025, CBN interventions accounted for only about 1.2 to 1.3 per cent of transactions. That is extremely small which is not enough to drive the market.
The reforms we have implemented have enabled the market to function more independently through improved transparency, stronger market conduct standards, better information symmetry and greater confidence among participants”.
However, the inability to meet demand in three out of five intervention exercises suggests that demand pressures remained significant during October.
The development also raises questions about the sustainability of relying on central bank dollar sales to address persistent foreign exchange shortages.
While interventions can provide temporary relief and support market liquidity, a more durable improvement would depend on stronger and more consistent foreign exchange inflows. Higher crude oil production and export receipts, improved non-oil export earnings, increased foreign direct investment and sustained diaspora remittances could help strengthen the supply side of the market.
For businesses, persistent difficulties accessing dollars could translate into delays in settling international obligations, higher import costs and uncertainty in inventory planning. These pressures may eventually feed into domestic prices, particularly for businesses dependent on imported inputs and finished products.
Although the approaching festive season could explain part of the increased demand for dollars, the frequency of unsuccessful CBN interventions also points to broader structural challenges in Nigeria’s foreign exchange market.
With the final quarter typically associated with stronger import activity, the ability of the CBN to maintain adequate market liquidity will remain important to exchange-rate stability and business confidence.
