MARKET NEWS

written by Bamidele Ogunwusi 

Nigeria’s foreign exchange market posted a record performance in January 2026, with a historic net foreign exchange (FX) surplus of $9.2 billion driven by a sharp rise in inflows and a significant decline in outflows, according to the latest Monthly Economic Report of the Central Bank of Nigeria (CBN).

The development highlights the growing impact of the apex bank’s reforms aimed at improving market liquidity, attracting foreign capital and supporting exchange rate stability.

Data from the report showed that total FX inflows rose to $12.2 billion in January 2026, compared with $8.4 billion in December 2025 and $9.6 billion in January 2025. At the same time, aggregate FX outflows fell sharply by 43 per cent month-on-month and 38 per cent year-on-year to $9.2 billion.

As a result, net FX inflows climbed to an unprecedented $9.2 billion, significantly higher than the $3.1 billion recorded in December 2025 and the $4.8 billion achieved in the corresponding period of last year.

Analysts said the strong surplus underscores improving liquidity conditions in Nigeria’s FX market and reflects increasing confidence among investors and market participants.

A breakdown of the inflow data showed that autonomous sources remained the biggest contributor to FX supply. Autonomous inflows, which accounted for about 62 per cent of total inflows, increased by 60 per cent month-on-month to $7.6 billion.

The strong performance from this segment suggests rising participation from foreign investors, exporters, remittance inflows and other private-sector sources that typically make up autonomous FX transactions.

CBN inflows also recorded substantial growth, rising by 60 per cent month-on-month to $4.7 billion. Together, the increase in both autonomous and official inflows significantly strengthened liquidity conditions in the market.

The improved supply of foreign exchange helped support the relative stability of the naira during the review period, reducing pressure on the local currency despite lingering economic challenges.

Market observers noted that the surge in inflows reflects the positive impact of reforms introduced by the apex bank over the past year. These measures, including efforts to improve transparency in the FX market and maintain attractive interest rates, have contributed to stronger investor sentiment and renewed foreign participation in Nigerian assets.

While inflows strengthened, demand for foreign exchange weakened considerably during the month.

The report attributed the decline in outflows largely to seasonal factors, including softer post-festive trade-related payments and reduced corporate demand for foreign exchange after the year-end business cycle.

CBN outflows moderated by 48 per cent month-on-month to $1.6 billion, indicating a reduction in official FX sales.

This trend was also evident at the Nigerian Autonomous Foreign Exchange Market (NAFEM), where the central bank’s FX sales plunged by 95 per cent month-on-month to just $34 million in January.

The sharp drop in intervention sales suggests that improved market liquidity reduced the need for direct central bank support, allowing market forces to meet a greater share of demand.

Similarly, autonomous outflows declined by 37 per cent month-on-month to $1.4 billion, reflecting weaker trade-related payments and lower external transaction volumes during the period.

Analysts believe the combination of stronger inflows and softer outflows points to a healthier balance in Nigeria’s foreign exchange market.

The record surplus also provides additional support for the country’s external reserves by reducing the need for heavy official interventions. With stronger liquidity conditions, the CBN has greater flexibility to manage reserves while maintaining orderly market operations.

Looking ahead, analysts expect FX inflows into the Nigerian economy to remain positive, supported by the CBN’s ongoing reforms and monetary policy stance.

The central bank’s strategy of maintaining relatively high interest rates is expected to continue attracting foreign portfolio investments and supporting liquidity in the market. In addition, the apex bank’s FX liquidity management framework is expected to help moderate excessive demand pressures and limit unnecessary outflows.

Although global economic uncertainties and fluctuations in oil prices remain potential risks, current indicators suggest that Nigeria’s FX market is becoming more resilient.

The record $9.2 billion net FX surplus achieved in January represents a major milestone for the economy and provides fresh evidence that ongoing reforms are helping to restore confidence, improve liquidity and strengthen the foundations of a more stable foreign exchange market.