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Naira gains as FX inflows rise 26% year-on-year - BUSINESSDAY
The naira extended its gains on Wednesday, supported by a 26 percent year-on-year increase in foreign exchange (FX) inflows.
At the close of trading, the naira appreciated by 0.3 percent to N1,521.46 per dollar, up from N1,526.05 on Tuesday at the Nigerian Foreign Exchange Market (NFEM), according to data from the Central Bank of Nigeria (CBN).
In the parallel market, commonly referred to as the black market, the naira held steady at N1,535 per dollar, according to street traders. GTBank’s FX rate for international transactions was also quoted at N1,534 per dollar.
According to the CBN’s latest quarterly economic report, total FX inflows into the Nigerian economy rose by 4 percent quarter-on-quarter (q/q) and 26 percent year-on-year (y/y) to $29 billion in Q1 2025. This marks the continuation of a trend observed since Q4 2023, largely driven by the CBN’s tight monetary policies.
However, FX outflows also increased at a faster pace, rising 14 percent q/q and 33 percent y/y to $13.8 billion, marking the highest quarterly outflow since Q2 2020. As a result, net FX flows stood at $15.2 billion in Q1 2025, slightly lower than the $15.8 billion recorded in Q4 2024.
Analysts at FBNQuest noted that robust FX inflows in Q1 2025 were primarily driven by autonomous sources, which surged to $20.7 billion from $16.3 billion in Q4 2024, the highest since the onset of the COVID-19 pandemic, though still below the $27.5 billion recorded in Q1 2020.
This rise in autonomous inflows was attributed to elevated market interest rates, which spurred carry trade flows, and the CBN’s FX market reforms, which enhanced transparency and price discovery in the official market. While the CBN does not provide a detailed breakdown, FMDQ data used as a proxy indicates that foreign portfolio investment (FPI) inflows rose 40 percent q/q and 101 percent y/y to $4.9 billion.
Conversely, FX inflows through the CBN declined to $8.3 billion from $11.5 billion in Q4 2024.
On the outflow side, CBN-related FX outflows remained stable at $10.5 billion and accounted for 77 percent of total outflows, largely driven by a 29 percent y/y increase in external debt service payments, which reached $1.4 billion. Autonomous FX outflows, however, grew sharply by 125 percent q/q to $3.2 billion.
The significant increase in autonomous inflows fueled by the CBN’s reforms has contributed to exchange rate stability in 2025, with the naira mostly trading between N1,500 and N1,600 per dollar.
Looking ahead, the analysts said potential monetary easing by the US Federal Reserve, combined with improved FX market conditions, could further boost FPI inflows, especially if the CBN maintains its current contractionary monetary stance.
