Nigeria’s foreign exchange market recorded its strongest inflows in five months in July, supported by increased intervention from the Central Bank of Nigeria (CBN) and stronger domestic dollar supply, according to preliminary data from FMDQ.
Total inflows into the Nigerian Foreign Exchange Market (NFEM) rose by 31.9 per cent month-on-month to $4.36 billion in July, compared with $3.31 billion recorded in June.
The increase was driven mainly by local inflows, which accounted for 66.7 per cent of total market supply during the period.
Local inflows surged by 79.8 per cent to $2.91 billion in July from $1.62 billion in the previous month.
The rise was largely supported by increased CBN intervention, which expanded 11.8 times compared with June, as well as higher inflows from non-bank corporates, which grew by 31.9 per cent month-on-month.
These gains helped cushion declines recorded in inflows from individuals and exporters.
Inflows from individuals fell by 54 per cent, while exporter inflows declined by 12.9 per cent during the month.
However, foreign inflows weakened in July, declining by 13.9 per cent to $1.45 billion from $1.69 billion in June.
The decline reflected weaker participation from foreign portfolio investors and other corporate sources.
Foreign portfolio investment inflows dropped by 18.5 per cent month-on-month, with both equity and fixed-income investments recording declines.
Equity investment inflows fell by 53.2 per cent, while fixed-income inflows declined by 16.1 per cent.
Other corporate foreign inflows also dropped significantly by 48.4 per cent during the period.
However, foreign direct investment inflows recorded a strong increase, rising by 388.3 per cent from a low base.
Analysts said the latest figures show that Nigeria’s FX market remains heavily supported by domestic dollar supply, even as foreign investors remain cautious due to global economic uncertainties.
The sustained intervention by the CBN has helped improve liquidity in the official foreign exchange market and reduce pressure on the naira.
Recent improvements in market confidence and attractive carry trade opportunities have also contributed to renewed interest in the market, analysts noted.
However, geopolitical tensions and uncertainty in global financial markets may continue to influence foreign investor decisions in the near term.
The latest data comes amid ongoing efforts by the CBN to stabilise the foreign exchange market, improve price discovery and attract more foreign capital.
The apex bank has introduced measures aimed at reducing market distortions and strengthening confidence in the official FX window.
Last week, the naira weakened against the US dollar across major foreign exchange markets.
At the official market, the currency depreciated by 0.45 per cent week-on-week to close at N1,368.22/$1, driven by increased demand from businesses and investors.
At the parallel market, the naira declined by 1.35 per cent to close at N1,387.82/$1.
Meanwhile, Nigeria’s external reserves fell slightly by 0.19 per cent week-on-week to $51.92 billion.
The decline marked the first weekly reduction in three months and reflected a slight moderation in the country’s external buffers.
Market observers said the July figures indicate that policy support and domestic supply are helping sustain stability in the FX market.
However, they added that the Monetary Policy Committee (MPC) faces the challenge of maintaining liquidity while reducing dependence on central bank intervention and encouraging more sustainable external capital inflows.
