Market News

written by Bamidele Ogunwusi 

Nigeria’s foreign exchange market is receiving a potentially significant boost as formal diaspora remittances accelerate towards the Central Bank of Nigeria’s (CBN) $1 billion monthly target, raising expectations that stronger dollar inflows could deepen FX liquidity, strengthen the country’s external position and provide additional support for the naira.

Latest data from the CBN’s Quarterly Statistical Bulletin showed that foreign exchange inflows through International Money Transfer Operators (IMTOs) stood at $1.3 billion in the first quarter of 2026.

Although the figure represented an 8 per cent decline from the preceding quarter, it was 45 per cent higher than the corresponding period of 2025.

The quarter-on-quarter decline, however, does not necessarily point to a deterioration in Nigeria’s remittance outlook. Rather, it reflected a normalisation after the strong inflows recorded in the preceding quarter, which benefited from the traditional seasonal increase in diaspora transfers during the festive period.

More recent data suggest that the underlying trend is considerably stronger.

According to the CBN Governor, high-frequency data showed that IMTO inflows reached a record $947 million in July 2026. This brought cumulative formal remittance inflows to $3.8 billion in the first seven months of the year, representing a robust 52 per cent increase compared with the corresponding period of 2025.

The latest performance is significant for Nigeria’s external sector because remittances provide an important source of foreign exchange that is not directly dependent on crude oil production or foreign portfolio investment.

At a time when policymakers are seeking to build a more diversified and resilient FX market, the growing contribution of diaspora funds could become increasingly important.

$12bn annual potential

The CBN has set an ambitious target of attracting $1 billion in remittances through formal channels every month.

If achieved and sustained, that would translate into approximately $12 billion annually.

Such an inflow would represent a substantial addition to Nigeria’s foreign exchange resources and could help reduce the economy’s vulnerability to fluctuations in oil receipts and volatile international capital flows.

The significance of the target is underscored by the pace of growth already being recorded.

The CBN’s QSB showed $1.3 billion in IMTO inflows as of March. With cumulative inflows reaching $3.8 billion by July, approximately $2.5 billion entered through formal channels during the four months following March.

That translates into an average monthly inflow of about $630 million between April and July.

However, July’s record $947 million performance indicates that the pace has accelerated sharply and is now approaching the $1 billion monthly threshold.

For the CBN, sustaining this momentum could provide an important additional source of liquidity to the FX market.

Reforms begin to pay off

Analysts have linked the increase to a combination of structural reforms and stronger engagement by the apex bank with key players in the remittance ecosystem.

The CBN has been working to improve remittance infrastructure, strengthen transparency in the FX market and make formal channels more accessible to Nigerians living abroad.

The transition towards a more market-reflective foreign exchange regime has also been critical.

The objective is clear: to bring a larger share of Nigeria’s substantial diaspora money into regulated financial channels.

For years, the size of Nigeria’s remittance market has been constrained by the prevalence of informal transfer routes.

Where recipients and senders perceive formal channels as expensive, cumbersome or unattractive, they may opt for alternatives outside the regulated financial system.

By improving infrastructure and making formal transactions more competitive and transparent, the CBN hopes to reverse this pattern.

The recent figures suggest that the strategy may be gaining traction.

Implications for the naira

For the naira, the importance of the remittance surge goes beyond the headline numbers.

Every additional dollar entering through the formal financial system has the potential to increase the pool of foreign exchange available for legitimate economic transactions.

This could improve market liquidity and contribute to more efficient price discovery.

A deeper FX market could, in turn, reduce volatility and help businesses plan more effectively.

However, stronger remittances should not be interpreted as an automatic guarantee of naira appreciation.

The relationship between remittance inflows and the exchange rate is more complex. Recipients may retain funds in foreign currency, spend them directly or convert them through different channels. Consequently, the entire volume of remittances does not necessarily become immediately available for FX market transactions.

Nevertheless, greater formalisation remains positive because it increases transparency and strengthens the financial system’s ability to intermediate these flows.

The development could also reduce the economy’s reliance on short-term external capital for FX liquidity.

Foreign portfolio investments, while important, can be highly sensitive to global interest rates, risk appetite and investor sentiment.

Remittances tend to be more closely associated with household support and therefore can provide a relatively more stable source of foreign exchange.

This makes them particularly valuable for Nigeria as policymakers seek to strengthen the resilience of the external sector.

Boost for businesses

The potential benefits extend beyond the exchange rate.

Improved FX liquidity could make it easier for businesses to access foreign exchange for legitimate transactions, including the importation of raw materials, machinery, technology and other production inputs.

For manufacturers, one of the persistent challenges has been uncertainty over the availability and cost of foreign exchange.

Greater liquidity, if sustained, could help reduce some of that uncertainty and improve corporate planning.

It could also support efforts to lower the cost pressures associated with imported inputs.

For foreign investors, the development is equally important.

Remittances defy global cost pressures

The strength of the latest remittance figures is particularly noteworthy because they have come against a challenging backdrop in major diaspora markets.

Persistent inflation and elevated energy costs across major advanced economies, including the United States, United Kingdom, Canada and Europe, have continued to squeeze household purchasing power.

Nigerians living abroad are therefore facing their own cost-of-living pressures.

Yet, despite these challenges, remittance flows into Nigeria have continued to increase.

The trend suggests that the demand to support families and businesses in Nigeria remains strong, while improvements in formal transfer mechanisms may be encouraging more diaspora Nigerians to use regulated channels.

 A new pillar of FX liquidity

The emerging remittance trend could consequently become an important component of Nigeria’s broader external-sector strategy.

For decades, crude oil has dominated the country’s FX earnings. But the volatility of oil prices and production challenges have repeatedly exposed the weakness of excessive dependence on a single major source of foreign exchange.

 Remittances offer a different proposition.

They are dispersed across millions of individuals, originate from multiple countries and are driven largely by household and family needs rather than commodity cycles.

That makes them potentially more resilient than some other external inflows.

The $3.8 billion recorded in the first seven months of 2026 demonstrates the scale of the opportunity.

If the current momentum continues and the CBN succeeds in achieving its $1 billion monthly target, formal remittance inflows could reach about $12 billion annually.

That would be a meaningful addition to Nigeria’s external liquidity and could complement earnings from oil, foreign direct investment, exports and other sources.

 The $1bn test

The immediate challenge for the CBN is sustaining the momentum.

July’s $947 million performance puts the $1 billion monthly target within touching distance, but maintaining that level consistently will require continued reforms.

The apex bank will need to ensure that formal channels remain competitive, reliable and accessible.

It will also need to maintain confidence in the FX market and avoid policy reversals that could recreate incentives for informal transactions.

Engagement with IMTOs and diaspora communities will remain crucial, particularly in identifying transaction costs, settlement delays and other barriers that could discourage users.

 Investor signal

For investors, the remittance surge provides another positive signal about the evolution of Nigeria’s external accounts.

The 52 per cent year-on-year growth in formal IMTO inflows during the first seven months of 2026 suggests that the country’s FX ecosystem is becoming increasingly capable of capturing diaspora dollars through regulated channels.

While remittances alone cannot solve Nigeria’s FX challenges or guarantee sustained naira stability, they can strengthen the foundation on which a more liquid and transparent market is built.

The $1 billion monthly target should therefore be viewed not merely as a remittance ambition but as part of the CBN’s wider FX reform strategy.

If achieved, it could deliver roughly $12 billion annually through formal channels, creating a sizeable supplementary source of foreign exchange.

With July inflows already reaching $947 million, the target is increasingly within reach.