Market News

The relative stability of the naira in recent times, which has led to improved predictability in the Foreign Exchange (FX) market, is spurring demand for forex among end-users, analysts at Quest Merchant Bank have said.

The analysts stated this in a report which focused on foreign exchange utilisation data for Q1’26 recently released by the Central Bank of Nigeria (CBN).

It noted: “The foreign exchange (FX) utilisation across various sectors of the Nigerian economy increased sharply by 74 per cent Year-on-Year (YoY) to $16.2 billion in Q1 2026, according to the CBN’s Quarterly Statistical Bulletin.

“While the increase was broad-based, the higher usage was primarily driven by a significant rise in FX utilisation for invisible transactions, which more than doubled to $11.4 billion from $4.5 billion in the previous year.

Consequently, invisible imports accounted for the largest share of total FX utilisation, at 70 per cent. “Within this segment, the financial services sector remained the largest user of foreign exchange, with FX utilisation rising by 117 per cent YoY to $9.0 billion.

The sector accounted for 79 per cent of total invisible transactions, highlighting its dominant share of FX demand within the segment.” The report further stated: “FX utilisation for business services, the second-largest category within invisible transactions, recorded a substantial increase to $1.2 bn from $223.6 million a year earlier.

“On the part of visible imports, FX utilisation for merchandise imports (goods) remained broadly stable (+0.2% YoY) at $4.9 billion. “FX utilisation by industrial firms, which are heavily dependent on imported raw materials, machinery and equipment, declined by 20 per cent YoY to $1.8 billion.

“In contrast, FX utilisation for the importation of manufactured and transport products increased significantly, totalling $1.1 billion and $295.0 million, respectively, from $477.9 million and $142.8 million in the previous year.”

According to the report, the increase in FX utilisation for the aforementioned products “partly reflects higher import costs arising from disruptions to global supply chains and elevated prices of critical inputs and raw materials following the US-Iran conflict.”

It also said that, “overall, the rise in sectoral FX utilisation reflects improved FX liquidity in the economy, supported by the stronger position of Nigeria’s gross external reserves.

Noting that sustained forex availability is also evident “in the relative stability of the naira, which has enhanced market confidence and encouraged greater.

FX demand from endusers by improving predictability in the FX market,” the report said that the Quest Merchant Bank analysts are anticipating “stronger FX utilisation across sectors, supported by the CBN’s ongoing reforms and policy measures aimed at sustaining FX supply, deepening market liquidity and preserving confidence in the naira.”