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Nigeria’s foreign exchange market recorded a sharp slowdown in August as total inflows into the Nigerian Foreign Exchange Market (NFEM) fell by 26.9 per cent month-on-month to $2.80 billion, down from $3.83 billion in July, according to latest figures from FMDQ.
The decline reflects weaker activity from both offshore and local players, with foreign inflows slumping to a four-month low and domestic contributions also tapering off.
Foreign inflows, which accounted for 38 per cent of the total, dropped by 61 per cent month-on-month to $1.06 billion. The steep fall was led by Foreign Portfolio Investors (FPIs), whose contributions tumbled by 65.8 per cent. Foreign Direct Investment (FDI) also retreated by 25.2 per cent.
Analysts say the slowdown underscores offshore investors’ cautious stance toward emerging markets, while also reflecting persistent concerns about Nigeria’s FX liquidity and policy direction. Despite the retreat by institutional investors, inflows from other corporates rose significantly, climbing 165.5 per cent month-on-month. This suggests that some multinational and corporate participants still see opportunities in the Nigerian market even as broader foreign appetite remains subdued.
On the domestic front, inflows contracted by 17.9 per cent to $1.74 billion, representing 62 per cent of the total. The drop was largely driven by exporters and importers, down 32.8 per cent, and non-bank corporates, which also slowed by 32.7 per cent.
In contrast, individuals and the Central Bank of Nigeria (CBN) provided support to the market. Inflows from private individuals surged by 413.8 per cent, while the CBN more than doubled its supply, rising by 118.9 per cent month-on-month.
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Market watchers suggest the apex bank’s stronger intervention was aimed at shoring up liquidity and reassuring participants following bouts of exchange rate volatility earlier this year.
Expressing the optimism, they noted that the outlook for inflows remains positive despite the August setback. With average monthly inflows in 2024 standing at $2.51 billion, expectations are that 2025 will surpass this level, supported by improved confidence and still-attractive naira yields.
“August’s pullback reflects near-term volatility, but Nigeria remains attractive for portfolio flows given its high-interest-rate environment. The challenge will be maintaining consistent policies and deepening transparency to keep investors engaged”, they said.
Foreign investors are expected to continue seeking carry-trade opportunities in naira assets as global central banks begin easing policy and yields in advanced markets narrow. However, sustained inflows will depend on the authorities’ ability to ensure liquidity and provide policy clarity.
With foreign reserves still fragile and the naira under pressure, inflows into the NFEM will remain a critical gauge of Nigeria’s macroeconomic health. Whether September brings a rebound or extends August’s weakness could shape investor sentiment through the rest of the year.
