Nigeria recorded a significant boost in foreign exchange inflows in July 2025, with a 24% increase compared to the previous month, according to data released by FMDQ. The growth was largely driven by non-bank corporates, which for the second consecutive week outperformed foreign portfolio investors (FPIs), signaling renewed confidence in the domestic economy.
Despite this shift, FPIs still accounted for the largest share of inflows, representing about 45% of total activity in July. Offshore investor inflows rose to $1.7 billion, up from $1.5 billion in June, reflecting cautious optimism amid favorable carry trade conditions and relative global macroeconomic stability.
Naira Stability and Growing Reserves
The naira maintained stability, trading within the N1,550/$ band, even as the U.S. dollar strengthened globally. Meanwhile, Nigeria’s foreign exchange reserves climbed to $41.05 billion as of August 20, 2025—their highest level since December 2021.
Reserves had previously dwindled to around $31 billion in 2024 as the Central Bank of Nigeria (CBN) intervened to support the currency. However, recent reforms and stronger inflows have reversed the trend.
CBN Reforms Boost Investor Confidence
Investor sentiment has improved following a series of CBN reforms aimed at strengthening Nigeria’s FX market. Key initiatives include:
- The unification of exchange rates to curb arbitrage.
- The introduction of the Nigerian Foreign Exchange (FX) Code.
- Clearing over $7 billion in verified forex backlogs, aligning the market more closely with international best practices.
CBN Governor Olayemi Cardoso emphasized at the latest Monetary Policy Committee meeting that the reforms are beginning to show measurable results. “We have acted as a catalyst to ensure this happens. The statistics confirm it is now taking effect,” he said.
Global Market Watch: Dollar in Focus
On the international front, traders are closely monitoring U.S. Federal Reserve Chairman Jerome Powell’s upcoming remarks at the Jackson Hole symposium. The U.S. Dollar Index (DXY) held steady at 98.65 during early Asian trading hours on Friday, as investors adjusted expectations for a possible September interest rate cut.
While earlier forecasts priced in a 90% chance of a rate cut, expectations have since dropped to 70%, supported by stronger-than-expected U.S. manufacturing data and a cautious stance from Fed officials. Analysts suggest Powell’s speech could provide fresh direction for the dollar and broader global markets.
Bottom Line
The combination of rising non-bank corporate inflows, improved FX reserves, and reforms by the CBN highlight a turning point for Nigeria’s financial stability. With reserves at a near four-year high and investor confidence rebounding, the country appears better positioned to weather external pressures—though global monetary policy shifts remain a key variable to watch.
