Foreign exchange (FX) inflows into Nigeria’s currency market rebounded sharply in December, driven largely by increased dollar sales from the Central Bank of Nigeria (CBN), even as participation by offshore investors remained muted toward the close of 2025, according to data released by FMDQ at the weekend.
The data showed that total FX inflows rose by 38 per cent month-on-month to $2.8 billion in December, marking a recovery from the steep 67 per cent contraction recorded in November. Despite the rebound, December’s inflow still ranked as the second-weakest level of FX supply in the past 16 months, underscoring the continued pressure in the market.
The improvement was largely attributable to heightened CBN intervention. Dollar sales by the apex bank increased to $654 million in December, more than double the previous month’s level of $318 million, highlighting the central bank’s active role in supporting market liquidity amid thin offshore inflows.
However, CBN intervention partly offset weakness in some domestic segments. FX inflows from domestic corporates declined by 5 per cent month-on-month to $420 million, making it the only segment to record a contraction during the period. Other sources posted gains, pointing to a broad-based, though still fragile, recovery in supply conditions.
Foreign portfolio inflows (FPIs) edged up by 7 per cent month-on-month to $632 million in December. While the increase was positive, it represented a significant slowdown compared with the $3.5 billion recorded in October, as global investors reduced risk exposure toward the year-end.
Market analysts attributed the softer offshore inflows to seasonal dynamics, noting that foreign investors typically scale back deployable liquidity, lock in profits, and rebalance portfolios at the close of the year.
Despite the moderation, analysts expect foreign participation to improve in the coming months, supported by Nigeria’s relatively high yields and renewed carry trade opportunities as policy uncertainty eases.
Meanwhile, foreign direct investment (FDI), the smallest component of foreign inflows, more than doubled to $50.1 million in December from $10.4 million in November, albeit from a low base, suggesting cautious but improving long-term capital interest.
Domestic sources also contributed meaningfully to the month-on-month rebound. FX inflows from exporters and importers rose by 49 per cent to $683 million, while inflows from individuals surged by 88 per cent to $275.3 million, reflecting stronger participation across non-offshore segments of the market.
Commenting on the outlook, analysts at FBNQuest Merchant Bank said easing inflation expectations could pave the way for a more accommodative monetary policy stance in 2026.
“Despite this shift, we expect offshore participation to remain steady, supported by the MPC’s gradual easing path and the relative attractiveness of Nigerian yields,” the bank noted. It added that a dovish policy stance by the US Federal Reserve in 2026 could further improve global risk appetite and encourage stronger capital inflows into emerging markets, including Nigeria.
For now, however, the December data suggest that Nigeria’s FX market remains heavily reliant on central bank intervention, even as broader inflows show early signs of stabilisation.
