Nigeria’s foreign exchange (FX) inflows increased in September this year amid positive sentiment among foreing investors as exhibited in their participation in the FX market, despite the sharp drop in the Central Bank of Nigeria (CBN) and non-bank corporates’ involvement in the market.
The latest data from the FMDQ Exchange on the FX market trend in the month under review indicated that total inflows into the Nigerian Foreign Exchange Market (NFEM) dropped by 5.7 per cent month-on-month (m/m) to $3.18 billion in September, from $3.37 billion in August.
According to the FMDQ Exchange, the drop is primarily driven by a 32.4 per cent decline in local inflows to $1.42 billion while foreign inflows surged by 38.9 per cent to $1.75 billion during the month.
The data showed that local inflows into the FX market accounted for 44.8 per cent of total transactions in September, down from 62.3 per cent in the preceding month, while interventions by the CBN dipped by 54.4 per cent month-on-month (m/m).
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Similarly, non-bank corporates and exporters/importers’ participation also declined by 48.4 per cent and 3.2 per cent respectively.
However, local participation in the FX market in the month under review from individuals was impressive, as inflows from them nearly doubled, rising 97.3 per cent m/m, reflecting growing retail participation and remittance-related activity.
Comparatively, the foreign inflows, which accounted for about 55.2 per cent of total market inflows, significantly improved on the back of higher Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs).
Specifically, the FMDQ Exchange reported that FDIs rose by 12.2 percentage points, while FPIs increased by 22.3 per cent m/m, signaling the foreign investors’ renewed interest in Nigeria’s high-yield offerings and improving liquidity in the FX market.
The data reflected that within the FPI segment, fixed-income instruments, such as government bonds and treasury bills, drove the bulk of the increase, rising 25.4 per cent m/m while equity investments also grew by 1.3 per cent m/m, underscoring continued investor caution in the domestic stock market amid ongoing currency volatility.
Investment analysts believe that the improving foreign participation in the FX market implies growing confidence in Nigeria’s ongoing FX market reforms and the apex bank’s sustained moves to stabilize the exchange rate of the Naira in the market.
Over the past months, the CBN has implemented sundry policy measures to improve FX liquidity, including interventions in the official market and adoption of a transparent rate determination mechanism.
Curiosly, despite the drop in total FX inflows into the economy in September this year, the value of the FX inflows was still higher than the 2024 full-year average of $2.51 billion, a trend which demonstrated a gradual recovery in the country’s FX liquidity conditions.
