Nigeria’s foreign exchange market recorded a significant rebound in February as total dollar inflows rose sharply to $4.37 billion, driven largely by increased intervention from the Central Bank of Nigeria and renewed interest from foreign portfolio investors.
Data released by FMDQ Securities Exchange over the weekend showed that total inflows into the Nigerian Foreign Exchange Market (NFEM) climbed by 45.4 per cent in February, compared to $3.01 billion recorded in January. The figure represents the highest level of dollar inflows seen in roughly four months.
A substantial portion of the increase came from domestic sources, which accounted for about 52 per cent of total inflows during the period. Local inflows rose sharply to $2.28 billion in February, up from $1.23 billion in the previous month.
Much of the improvement was attributed to stronger intervention by the Central Bank of Nigeria. The apex bank significantly increased its dollar supply to the market during the month in a bid to enhance liquidity and support trading activities.
The central bank has continued to maintain an active presence in the foreign exchange market as authorities work to stabilise the naira and rebuild investor confidence following recent reforms in the country’s currency management framework.
Beyond the central bank’s intervention, other domestic participants also contributed to the rise in dollar inflows. Funds from individuals increased during the period, while exporters and importers supplied more foreign exchange into the system. Non-bank corporates also added to the inflows, though at a slower pace.
Foreign investors likewise increased their participation in the market, although the growth was less pronounced compared to domestic contributions. Total inflows from international sources rose to $2.09 billion in February, up from $1.79 billion in January, representing about 48 per cent of total inflows for the month.
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The improvement in foreign inflows was largely driven by foreign portfolio investors (FPIs) who typically invest in Nigerian equities and government debt instruments.
Portfolio investments rose by about 22 per cent during the month. Within that category, investment in Nigerian equities recorded the strongest growth, jumping by more than 70 per cent, an indication of renewed foreign interest in the country’s stock market.
Investment in fixed-income securities, including government bonds, also increased by approximately 21 per cent, reflecting sustained demand for Nigeria’s relatively high-yielding debt instruments.
Despite the overall positive trend, some categories of foreign investment recorded declines. Inflows from other foreign corporates dropped by about 25 per cent, while foreign direct investment (FDI)—which typically involves long-term commitments such as factories and infrastructure projects—fell by around 21 per cent.
The decline suggests that while short-term capital flows are improving, long-term foreign investment into Nigeria is still recovering gradually.
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Financial analysts say the rise in dollar inflows indicates that the central bank’s continued intervention and the gradual return of foreign portfolio investors are helping to improve liquidity in the foreign exchange market.
However, analysts at Cordros Capital cautioned that global economic uncertainties could limit the pace of foreign investment inflows in the near term, as international investors remain increasingly cautious.
For now, the stronger dollar supply from the Central Bank of Nigeria, combined with increased participation by foreign portfolio investors, appears to be supporting stability in the country’s foreign exchange market and improving overall dollar availability within the financial system.
