Nigeria’s net forex inflow rises 11% to $66.23bn

Nigeria's foreign exchange market delivered a headline growth story in 2025, with net forex inflows climbing 11.4% year-on-year to $66.23 billion—up from $59.44 billion in 2024. The expansion reflects renewed confidence in Africa's largest economy, driven by oil price recovery, Eurobond demand, and diaspora remittances. However, beneath the surface, a troubling divergence has emerged: while total inflows accelerated, the Central Bank of Nigeria's (CBN) direct channel contracted 18%, raising questions about currency stability and capital sustainability.

## What Drove the $66.23 Billion Forex Inflow?

Nigeria's 2025 forex surge was fueled by three primary sources. First, crude oil revenues rebounded as global prices recovered from 2024's weakness, boosting petroleum export proceeds—the country's lifeblood. Second, international portfolio investors returned to Nigerian bonds and equities, attracted by the CBN's aggressive interest rate regime (currently holding at 27.5%) and inflation expectations that favor fixed-income yields. Third, diaspora remittances remained resilient, with Nigerians abroad sending home an estimated $18–20 billion annually, undeterred by naira volatility.

The headline 11.4% growth masks deeper structural shifts. Non-CBN channels—primarily commercial banks, money market instruments, and alternative finance corridors—captured the majority of the inflow surge. This decentralization, while appearing healthy on paper, reflects investor hesitation to park capital directly with the central bank, a signal of lingering confidence gaps.

## Why Did CBN's Direct Channel Drop 18%?

The 18% decline in CBN-intermediated forex flows is the data point that should alarm investors and policymakers alike. This metric tracks foreign exchange entering Nigeria through the central bank's official window—historically the most reliable barometer of sustained, policy-friendly capital inflows. The contraction suggests that international investors and corporate entities are increasingly bypassing the CBN's formal channels, opting instead for direct bank-to-bank deals or offshore settlement mechanisms.

Possible drivers include: lingering naira depreciation fears (the currency lost 37% of its value against the dollar in 2023–2024), tighter CBN controls on forex access for imports, and hedging costs that make official channels less attractive than parallel markets. While parallel market spreads have narrowed significantly under CBN Governor Olayemi Cardoso's reforms, they remain wide enough to incentivize workarounds among large corporates.

## What This Means for Investors

The bifurcated inflow picture creates both opportunity and risk. Strong total inflows support naira stability—critical for foreign investors in equities, real estate, and manufacturing. The $66.23 billion buffer provides a 7–8 month import cover, comfortably above the 3-month minimum safety threshold. However, the CBN channel weakness signals that policy certainty remains fragile. If external shocks emerge—geopolitical turmoil, commodity price crashes, or rate-cut signals from the U.S. Federal Reserve—foreign capital could reverse quickly through non-CBN channels, where CBN intervention is slower.

Investors should monitor the Q2 2025 data closely for CBN channel recovery. A sustained contraction below -15% would indicate structural loss of confidence in the central bank's framework, potentially forcing policy tightening that could hurt equities and bonds.

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