- Nigeria’s FX market sees dollar inflows surge to $112 billion, boosting investor confidence
- Reforms by CBN Governor Cardoso are reversing previous FX market challenges and attracting investment
- International rating agencies upgrade Nigeria’s outlook, reflecting improved exchange rate management and policy credibility
Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.
Nigeria’s foreign exchange market has received a major boost after total dollar inflows into the economy surged to $112 billion within 12 months, signalling renewed investor confidence and stronger liquidity in the country’s financial system.
A new report by the Financial Markets Dealers Association (FMDA) showed that the sharp rise in inflows was driven largely by autonomous sources such as diaspora remittances, foreign portfolio investments, export earnings and private capital inflows.
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The development represents a significant turnaround for Nigeria’s FX market, which only a few years ago battled severe dollar shortages, exchange rate distortions and billions of dollars in unmet foreign exchange obligations.
Autonomous inflows drive recovery
According to the report, autonomous inflows accounted for nearly 65 per cent of total FX inflows during the review period, underscoring a growing shift away from dependence on direct Central Bank of Nigeria (CBN) interventions.
The inflows from autonomous sources climbed to $72.91 billion, up from $59.29 billion recorded previously and far above the $41.80 billion seen before recent reforms gathered pace.
Analysts said the increase reflects improving confidence among foreign investors, exporters and Nigerians in the diaspora who had previously remained cautious because of uncertainty surrounding Nigeria’s foreign exchange market.
The report also revealed that direct FX sales by the CBN rose sharply by 126.37 per cent to $8.94 billion from $3.95 billion earlier recorded.
Cardoso’s reforms begin to yield results
Economic experts linked the recovery to sweeping reforms introduced by the CBN under Governor Olayemi Cardoso since assuming office in October 2023.
At the time, Nigeria faced mounting pressure from multiple exchange rates, weak investor confidence and an FX backlog estimated at over $7 billion owed to foreign companies, airlines and investors unable to access their funds.
To restore confidence, the apex bank launched a forensic audit of outstanding claims before settling verified obligations.
The CBN also unified exchange rates and introduced an electronic FX matching system aimed at improving market transparency and efficiency.
Cardoso had defended the reforms, insisting that rebuilding credibility was critical to restoring investor trust and stabilising the economy.
Market analysts believe the reforms have reduced speculative activities, improved transparency and encouraged stronger participation from private-sector players.
Invisible transactions surge
The FMDA report further showed that total FX utilisation rose to $47.17 billion during the period as economic activities and cross-border transactions increased.
Invisible transactions emerged as the largest source of FX demand for the first time, surpassing merchandise imports. Invisible-related FX utilisation jumped to $27.27 billion from $11.10 billion previously.
Financial services accounted for the largest share at $21.22 billion, reflecting increased international payments, debt servicing, airline operations, shipping services and technology-related transactions, according to a report by Daily Trust.
Import-related FX demand also increased from $15.54 billion to $19.90 billion, while oil-sector FX demand nearly doubled to $4.98 billion.
Global rating agencies upgrade Nigeria
The reforms have also attracted positive attention from international credit rating agencies.
Fitch Ratings recently revised Nigeria’s outlook from negative to stable, citing improved exchange rate management and stronger policy credibility.
S&P Global Ratings also upgraded Nigeria’s outlook from stable to positive, while Moody’s Ratings raised the country’s credit rating from “Caa1” to “B3”.
The agencies pointed to FX liberalisation, tighter monetary policy and fiscal reforms as key drivers behind the improved outlook.
Experts urge policy consistency
Stakeholders across the financial sector described the rising inflows as evidence that confidence is gradually returning to the Nigerian economy.
President of the Association of Bureaux De Change Operators of Nigeria, Dr Aminu Gwadabe, said the reforms had helped stabilise the naira and improve liquidity conditions.
Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, noted that stronger inflows from remittances, exports and foreign investments showed that investors now have greater confidence in the transparency of the market.
Analysts, however, warned that sustaining the gains would require consistent policies, stronger non-oil exports, lower inflation and increased productivity across the real sector.
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They stressed that maintaining transparency and encouraging long-term foreign investment would be crucial to preserving stability in Nigeria’s foreign exchange market and supporting the naira in the years ahead.
CBN approves $150,000 weekly FX access
Legit.ng earlier reported that expectations of better foreign exchange (FX) liquidity are rising across Nigeria’s financial markets after the CBN approved 82 recapitalised Bureau De Change (BDC) operators to access up to $150,000 weekly from the Nigerian Foreign Exchange Market (NFEM).
Industry stakeholders describe the decision as timely and strategic, saying it could help ease dollar shortages in the retail segment, reduce the gap between official and parallel market rates, and boost confidence in the naira.
However, findings by DailyTrust show that access to the dollar supply is limited strictly to the 82 BDC operators that successfully met the new licensing and recapitalisation requirements.
Source: Legit.ng