Market News

The stability of the naira in recent weeks, despite the decline in foreign exchange (FX) inflows into the Nigerian Foreign Exchange Market (NFEM) last month, is driven by the muted demand for forex, analysts at FBNQuest Research have said.

In a report released yesterday, the analysts attributed the muted forex demand to a decline in import activity. They are also noted that while there was a drop in FX inflows into the Nigerian Foreign Exchange Market (NFEM) in September, an increase in Foreign Portfolio Investments (FPIs) and Foreign Direct Investments (FDI), “have supported a steady increase in Nigeria’s gross external reserves in recent months.”

The analysts stated: “According to FMDQ data, total foreign exchange (FX) inflows into the Nigerian Foreign Exchange Market (NFEM) declined 6% month-on-month (MoM) to $3.2 bn in September 2025. This follows a 12% MoM drop recorded in August, marking the second consecutive monthly decline.

“The MoM drop was primarily driven by reduced domestic participation, with significant contractions observed in FX inflows from non-bank corporates and CBN interventions. The non-bank corporates segment, which includes large private-sector entities, saw its FX contributions fall to $426 m in September, a sharp drop from $826 m the previous month.

“The CBN’s FX sales, which typically offer liquidity support to the FX market, also declined significantly to $261 m, down from $574 m in the previous month. “Similarly, the exporters/importers segment recorded a mild contraction of 3% MoM to $634 m in September, suggesting a slowdown in export earnings during the review month.”

They further said: “While FX inflows from domestic sources weakened in September, increased foreign participation helped to offset the overall decline partially.

Specifically, inflows from Foreign Direct Investments (FDIs) recorded the most significant increase, rising sharply to $295 m from a paltry $22.4 m in the previous month. “Additionally, there was sustained support from offshore investors, driven by the attractive carry-trade opportunities in the Nigerian market. FX contributions from FPIs increased by 22 per cebt MoM to $1.3 billion.

“However, FX remittances from other corporates, which are typically Trade: UK, Nigeria strengthen ties under developing countries scheme foreign-owned or multinational entities operating in Nigeria, fell during the month to $124 m, down from $150 million in the previous month.”

The analysts, who noted that, “despite the m/m decrease in FX liquidity, naira volatility has eased, supported by subdued FX demand pressures, mostly driven by a decline in import activity,” also pointed out that, “foreign investors have maintained strong participation in Nigeria’s fixed-income market, driven by Nigeria’s attractive interest rate differentials.”