Market News

by Opeyemi Owoseni

Foreign investment dips sharply, CBN intervention keeps official naira stable

Dollar inflows into Nigeria’s official foreign exchange (FX) market fell sharply last week, with foreign investors retreating while domestic sources dominated liquidity, according to a recent report by Coronation Merchant Bank.

Total inflows into the Nigeria Foreign Exchange Market (NFEM) declined 20.67% week-on-week, dropping to US$593.70 million from US$748.40 million the previous week. The decline was largely driven by a sharp fall in foreign participation.

Foreign Investment Retreats

The report showed that foreign portfolio investment (FPI) inflows plunged 72.91%, falling to US$46 million from US$169.8 million. Foreign direct investment (FDI) also tumbled 81.87%, reaching just US$7 million, down from US$38.6 million.

Foreign sources therefore accounted for only 17.05% of total FX inflows, signaling cautious sentiment among global investors despite FX reforms implemented in 2024 and 2025. Analysts warn that the continued drop in foreign inflows reflects concerns over Nigeria’s macroeconomic and policy environment.

Domestic Sources Keep Market Liquid

With foreign participation weakening, local players supplied 82.95% of total inflows. Individuals led with US$165.1 million, followed by the CBN with US$128 million, while exporters and importers contributed US$115.6 million.

Coronation researchers noted that the growing reliance on domestic sources underscores Nigeria’s dependence on central bank intervention and local FX recycling, rather than sustainable foreign capital.

Naira Performance: Official vs Parallel Market

The naira’s performance was mixed. At the official window, it appreciated 0.88% week-on-week to N1,430.85/US$, largely supported by CBN dollar sales. Meanwhile, the parallel market rate weakened to around N1,490/US$, reflecting ongoing FX demand pressures outside the formal market.

Nigeria’s gross external reserves edged up 0.58% to US$45.50 billion, adding about US$264.6 million, despite heavy FX intervention last year. The CBN reportedly spent about US$4.1 billion in H1 2025 defending the naira.

Analysts said that platforms like BMatch (Bloomberg FX Matching System) and EFEMS (Electronic Foreign Exchange Matching System) have improved interbank transparency and narrowed gaps between official and parallel rates.

Outlook for 2026

In the near term, the naira is expected to trade within a relatively narrow official band, supported by CBN intervention and seasonal easing in FX demand. Coronation projects that the naira will trade between N1,400–N1,500/US$ in 2026, helped by higher oil production, lower refined fuel imports, and improved export-driven FX liquidity.

However, experts warn that durable stability depends on consistent policy, stronger investor confidence, fiscal discipline, and a transparent, market-driven FX framework capable of attracting long-term foreign capital.