Foreign Inflows Anchor Naira As Domestic Dollar Supply Weakens
By FIDELUS ZWANSON
NIGERIA’S foreign exchange market showed signs of resilience in September as foreign investments helped stabilise the naira amid a sharp drop in domestic dollar supply from the Central Bank of Nigeria (CBN) and major corporates.
Data from FMDQ Exchange revealed that total FX inflows declined by 6% month-on-month to $3.2 billion, extending August’s 12% slump. Analysts say the trend reflects tightening liquidity as the CBN scales back interventions and private corporates delay conversions.
The apex bank’s FX sales plunged by more than half to $261 million, from $574 million in August, as Governor Olayemi Cardoso maintained a market-driven exchange rate policy. “The reduced intervention is deliberate — it’s about encouraging self-sustaining liquidity,” said currency analyst Steve Omoh.
Non-bank corporates also pulled back sharply, with inflows dropping to $426 million from $826 million, as many firms held on to dollar reserves amid uncertainty.
However, foreign inflows surged, cushioning the shortfall. Foreign Direct Investment (FDI) climbed to $295 million in September — a 1,200% jump from August — while Foreign Portfolio Investment (FPI) rose 22% to $1.3 billion, driven by attractive yields on Nigerian debt instruments.
According to analysts, these inflows reflect growing confidence in Nigeria’s economic reforms, fiscal tightening, and transparent FX management.
Despite weak domestic supply, the naira traded steadily through the month, supported by reduced import demand, as high interest rates and slow consumer spending curbed pressure on the currency.
Nigeria’s external reserves also rose modestly, buoyed by steady portfolio inflows and stable oil receipts. Analysts say this balance between selective CBN support and market forces is helping restore credibility to Nigeria’s FX framework.
“The naira’s stability now reflects improving confidence rather than heavy-handed control,” noted CSL Stockbrokers in a market brief.
