Nigeria’s foreign exchange market witnessed a dramatic withdrawal of overseas capital last week, with official data revealing a sharp 20.67% drop in total dollar inflows. According to a financial markets report from Coronation Merchant Bank, weekly inflows fell to $593.70 million from $748.40 million, underscoring a significant retreat by international investors despite recent foreign exchange reforms.
The decline was driven primarily by a steep fall in foreign capital participation. Inflows from Foreign Portfolio Investment (FPI) plummeted by 72.91% to $46 million, down from $169.8 million the previous week. Foreign Direct Investment (FDI) faced an even steeper contraction, collapsing by 81.87% to just $7 million. Collectively, foreign sources now account for only 17.05% of total FX inflows, signaling persistent caution among global investors.
“These figures highlight a concerning trend of foreign investor hesitancy,” said a Lagos-based financial analyst. “The reforms initiated in 2024 and 2025 have yet to rebuild sufficient confidence to attract sustained foreign capital at needed levels.”
Conversely, domestic players have become the market’s primary lifeline, contributing 82.95% of all inflows. Individual transactions led domestic activity with $165.1 million, followed by the Central Bank of Nigeria (CBN) with injections of $128 million. Exporters and importers accounted for a further $115.6 million. This growing reliance on local sources raises questions about the market’s long-term resilience without robust external investment.
Naira Stability Buoyed by Central Bank Intervention
Amid the shifting investment landscape, the Nigerian Naira presented a mixed performance. In the official Investor & Exporter (I&E) window, the currency appreciated by 0.88% week-on-week, closing at N1,430.85 per US dollar, a stability analysts attribute to direct CBN dollar sales. However, a significant gap persists with the parallel market, where the dollar traded around N1,490, indicating underlying demand pressures.
Supporting these interventions, Nigeria’s gross external reserves saw a modest 0.58% increase to $45.50 billion. This follows a period of intense defense of the currency, with the CBN expending approximately $4.1 billion to support the Naira in the first half of 2025 alone.
Market observers note that enhanced trading platforms like BMatch and the EFEMS system have improved interbank transparency, helping to narrow the spread between official and unofficial rates. In the near term, the Naira is expected to remain within a constrained trading band, supported by continued CBN activity and a seasonal moderation in demand.
Outlook Hinges on Policy and Confidence
Looking forward, Coronation Merchant Bank projects the Naira to trade between N1,400 and N1,500 per dollar through 2026. This forecast anticipates support from improved domestic oil production, decreased imports of refined fuel, and a gradual rise in export-related foreign exchange liquidity.
However, economists stress that this trajectory is not guaranteed. “A stable and sustainable foreign exchange regime will require consistent, transparent policy implementation,” the Coronation report emphasized. Achieving lasting currency stability and reversing the foreign investment trend, experts concur, will depend on stronger fiscal discipline, enhanced investor confidence, and a demonstrably market-driven FX framework capable of attracting long-term foreign capital.
The coming months will prove critical for Nigeria’s monetary authorities as they navigate the challenge of stabilizing the currency amidst a cautious global investment climate.
