Market News

The naira closed flat in the official foreign exchange (FX) market on Monday as Nigeria’s external reserves rose to $46.7 billion, supported by Eurobond issuance and the strongest FX inflows recorded in six months.

The local currency held steady amid rising inflows driven by renewed foreign investor interest and recent Eurobond proceeds, which have strengthened the country’s reserve position.

Data from the Central Bank of Nigeria (CBN) showed that the naira depreciated marginally by 0.4 per cent, with the dollar quoted at N1,448.03 on Monday, compared with N1,442.43 on Friday at the Nigerian Foreign Exchange Market (NFEM).

In the parallel market, the naira appreciated slightly by N2 to close at N1,455 on Monday, from N1,457 on Friday.

Nigeria’s external reserves reaching $46.7 billion has been largely attributed to the federal government’s Eurobond issuance and rising FX inflows.

“The CBN also reports that reserves have hit an eight-year high of US$46.7 billion,” said Tilewa Adebajo, chief executive officer of CFG Advisory.

October 2025 marked the country’s strongest month for foreign exchange inflows since May, supported by improved macroeconomic stability and renewed appetite from offshore investors seeking opportunities in Africa’s largest economy.

Data from FMDQ showed that total FX inflows jumped by 91 per cent month-on-month to $6.1 billion in October, the highest since the $6.7 billion recorded in May. Analysts say the surge reflects Nigeria’s increasingly attractive investment environment and strong global demand for yields.

Analysts at FBNQuest Merchant Bank linked the rebound to “carry-trade opportunities” in Nigeria’s FX market amid elevated domestic interest rates. According to the firm, the combination of high local rates and recent US Federal Reserve policy easing has widened the rate differential, making Nigerian assets more appealing. “This significant carry-trade has reinforced Nigeria’s position as an attractive investment destination for offshore investors seeking higher yields,” the firm said in a note on Tuesday.

Renewed investor confidence is also reflected in the 400 per cent oversubscription of Nigeria’s $2.35 billion Eurobond issued two weeks ago. The country is gaining additional positive attention from global rating agencies, with S&P Global recently revising Nigeria’s outlook from “stable” to “positive” while affirming its B-/B rating.

Samuel Sule, chief executive officer of Renaissance Capital Africa, said macroeconomic stability and highly attractive real returns are drawing investors back to local-currency debt. “Expect that their continued participation will be determined by future rate conditions and the stability of the FX,” he said.

FMDQ data also showed that foreign investors accounted for more than half of total FX inflows during the period, rising by 161 per cent to $3.5 billion. Inflows into fixed-income securities alone reached $3.4 billion, underscoring strong demand for Nigeria’s high-yield instruments. Local participation strengthened as well, with FX contributions from individual investors rising to $602 million from $104 million in the previous month, signalling improved accessibility and deeper retail engagement.

However, Foreign Direct Investment (FDI) inflows fell by 25 per cent month-on-month to $222 million, reflecting persistent structural challenges, including insecurity and policy uncertainty, that continue to deter long-term capital.

The FX market continues to receive strong inflows even as a larger interest rate cut looms. Despite the Monetary Policy Committee (MPC) lowering benchmark interest rates by 50 basis points to 27 per cent in September—its first cut since 2020—Nigeria still maintains one of the highest policy rates globally, making it highly attractive for foreign portfolio investors. The unusual stability of the naira, alongside continued moderation in inflation, which eased for the seventh consecutive month to 16.1 per cent in October 2025, is further boosting sentiment and could pave the way for deeper policy easing.

“Despite expectations of an additional rate cut by the MPC later this month, we anticipate sustained foreign portfolio inflows, supported by attractive interest rate differentials,” FBNQuest analysts said.