FX inflows up 24% as non-bank corporates overtake FPIs

Foreign exchange (FX) inflows into the country rose 24 percent month-on-month in July 2025, regaining momentum and signalling improved investor sentiment, as non-bank corporates overtook foreign portfolio investors (FPIs) for two consecutive weeks, according to FMDQ data.

A recent report by FBNQuest shows total inflows climbed to approximately $3.8bn in July, up from $3.1bn in June. Despite the improvement, inflows remained well below the $6.7bn peak recorded in May, underlining continued volatility in FX liquidity.

FPIs remained the single largest driver of inflows overall, contributing around 45 percent of July’s total. Offshore investor inflows rose to $1.7bn, from $1.5bn in June, reflecting tentative foreign investor interest amid favourable carry trade dynamics and relatively stable global macro conditions.

FBNQuest analysts noted that Nigeria’s reliance on FPI flows provides near-term FX support but exposes the market to external shocks, given the sensitivity of these flows to global risk sentiment, interest rate movements, and domestic macro stability.

However, weekly data from Coronation Merchant Bank shows a shift in composition, with non-bank corporates emerging as the top contributors to FX supply. They accounted for $227.4m (28.88%) in one week, ahead of exporters at $179.6m (22.81%), the CBN at $171.2m (21.74%), and FPIs at $167.4m (21.26%). Individuals and other sources contributed 4.73 percent and 0.57 percent, respectively. Notably, the Central Bank of Nigeria (CBN) made no direct market interventions during that week.

FBNQuest also highlighted a strong pickup in monthly inflows from non-bank corporates, which rose from $800m in June to $1.2bn in July. This growth is attributed to improved export earnings particularly from upstream oil producers repatriated profits, and better access to formal FX channels.

Despite stronger reserves, the CBN increased its market interventions in July, selling $326m, compared to $183m in June, reflecting efforts to address rising FX demand and support the naira.

Still, the naira weakened slightly in July, depreciating by 0.13 percent m/m to close at N1,534.00/1$. Analysts caution that despite improving sentiment, structural challenges, such as liquidity constraints and global headwinds may weigh on the sustainability of higher inflow levels in the near term.

On Tuesday, the naira depreciated slightly by 0.08 percent as the dollar was quoted at N1,534.93, down from N1,533.67 on Monday at the Nigerian Foreign Exchange Market (NFEM), according to CBN data. In the parallel market, the currency held steady at N1,545 per dollar.

While FX inflows into Nigeria have improved in recent months supported by renewed FPI, steady diaspora remittances, and a relatively favorable trade balance, the sustainability of these inflows remains uncertain as the country heads into the second half of 2025, analysts at Norrenberger said.

In its economic outlook, Norrenberger, a Nigerian integrated financial services group, highlighted that expected monetary easing in the second half of the year could dampen foreign portfolio investor appetite, which would weigh on FX inflows.

A report by Coronation Merchant Bank revealed that total FX inflows rose to $787.50 million last week, up from $732.80 million in the previous week.

Gross external reserves increased by $431.86 million (1.07%) to $40.72 billion as of Wednesday, supported by consistent daily inflows throughout the week.