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•Exporters, importers record steepest decline in domestic supply
Persistent global uncertainties and heightened geopolitical tensions took a toll on Nigeria’s foreign exchange market in June, as foreign investors turned cautious and domestic foreign currency supply weakened, dragging total inflows into the Nigerian Foreign Exchange Market (NFEM) down by 20.7 per cent.
Latest data from FMDQ showed total FX inflows fell to $3.31 billion in June from $4.17 billion recorded in May, reflecting weaker contributions from both local and foreign market participants despite ongoing reforms aimed at improving liquidity and boosting investor confidence.
The sharpest decline came from domestic sources, where inflows dropped 30.1 per cent month-on-month to $1.62 billion, accounting for 48.9 per cent of total market inflows.
Exporters and importers recorded the steepest contraction, with their FX inflows falling by 32.5 per cent, highlighting weaker trade-related foreign currency receipts during the month. Non-bank corporates also reduced their market participation, with inflows declining by 30.5 per cent, while contributions from the Central Bank of Nigeria (CBN) fell by 12.1 per cent.
The only bright spot on the domestic front was individuals’ inflows, which rose by 70 per cent over the period. However, the increase was insufficient to offset the broad-based weakness across the larger supply segments.
Foreign inflows also moderated, falling 9.0 per cent to $1.69 billion from $1.86 billion in May. Although foreign investors remained the largest source of FX liquidity, contributing 51.1 per cent of total inflows, appetite for Nigerian assets softened during the month.
The decline was largely driven by weaker foreign portfolio investment (FPI), which fell 13.9 per cent month-on-month. Within the segment, fixed-income inflows declined by 16.3 per cent, outweighing the 43.8 per cent increase recorded in equity investments.
Foreign direct investment (FDI), however, provided some support, rising by 37.8 per cent, while inflows from other corporate investors surged by 324.9 per cent. Even so, the gains were not enough to compensate for weaker portfolio flows and declining domestic FX supply.
The figure underscores the continued vulnerability of Nigeria’s foreign exchange market to shifts in global risk sentiment, particularly as investors reassess emerging market exposure amid geopolitical tensions and uncertainty over the global economic outlook.
“The decline in fixed-income portfolio inflows suggests investors are becoming more selective despite Nigeria’s relatively attractive yields,” analysts at Cordros Research said, noting that risk-off sentiment across global markets has continued to influence capital allocation decisions.
They observed that the sharp decline in inflows from exporters and importers also signals weaker trade-related FX earnings, limiting the amount of foreign currency available to the market and contributing to the overall decline in liquidity.
