Nume Ekeghe

Nigeria’s foreign exchange market witnessed a sharp recovery in October, with total inflows rising by 62.2 per cent month on month to $5.15 billion, the highest level in five months, underscoring a gradual return of investor confidence and improved liquidity conditions.

Fresh data from FMDQ Exchange showed that the increase was driven largely by stronger participation from both foreign and domestic investors, supported by improving market sentiment and a more stable macroeconomic backdrop.

Foreign inflows accounted for 64.5 per cent of total transactions, climbing 89.7 per cent to $3.32 billion in October, September $1.75 billion. The rebound was led by a sharp recovery in foreign portfolio investment (FPI) inflows, which grew 120.7 per cent month on month, alongside higher receipts from the other corporate segment +30.5 per cent. These gains helped offset a 25.5 per cent decline in foreign direct investment (FDI) inflows during the period.

Domestic inflows, which made up the remaining 35.5 per cent, expanded by 28.4 per cent, supported by a notable rise in individual contributions 370.6 per cent and higher flows from other corporates 30.8 per cent and exporters 7.2 per cent. This came despite a sharp drop in Central Bank of Nigeria (CBN) inflows, which fell 59.6 per cent month on month.

Analysts at Cordros securities in a report noted that the figures point to a measured return of offshore participation in Nigeria’s FX market following months of volatility and policy uncertainty.

The improvement, they said, also coincides with a global shift towards monetary policy easing, which has revived appetite for higher-yielding frontier market assets.

They state: “Looking ahead, we expect total foreign exchange inflows from both domestic and foreign sources to remain robust, surpassing the 2024 average level $2.51 billion), driven by sustained market confidence and still-attractive carry-trade opportunities.



“According to data from the Domestic and Foreign Portfolio Investment (FPI) Report of the Nigerian Exchange (NGX), total transactions in the local bourse surged by 78.5 per cent m/m to N1.62 trillion in September, August: N908.38 billion. The upswing reflected increased participation from both domestic, 76.1 per cent of total transactions and foreign 23.9 per cent investors. A closer look at the breakdown shows that domestic investors’ inflows rose markedly by 67.5 per cent m/m to N1.23 trillion, August, N736.60 billion, driven primarily by a 143.1 per cent m/m surge in institutional transactions, reflecting large block trades, which more than offset the decline in retail activity -18.9 per cen m/m).

“Similarly, foreign inflows increased by 125.6 per cent m/m to N387.62 billion, August: N171.80 billion, buoyed by moderating fixed income yields and improving market sentiment, which strengthened foreign demand for Nigerian equities.”

They added, “However, net outflows rose modestly by 5.0 per cent m/m to N3.15 billion, August: N3.00 billion, as higher net domestic outflows, N266.45 billion slightly outweighed net foreign inflows N263.30 billion. 

“Looking ahead, we expect domestic investors to remain the dominant drivers of market turnover, supported by the continued decline in fixed income yields, which should sustain rotation into equities. In addition, relative naira stability and improving macroeconomic conditions are likely to strengthen foreign investor confidence and support renewed participation in the local market over the near term.”