Domestic forex inflow highest in six years

The inflow of foreign exchange into the economy from domestic sources is at its highest in six years, according to a Central Bank of Nigeria (CBN) report.

The report showed a broadly steady business expansionary trend despite marginal fluctuations across the sectors.

This came as the forex inflows from domestic sources into the Nigerian Foreign Exchange Market (NFEM) rose to a six-year high on the back of steep increases in inflows from private sources, other than the CBN.

The latest Purchasing Manager’s Index (PMI) report released by the CBN indicates that the PMI remained above the 50-point threshold for the sixth consecutive month, indicating continued expansion of business activities in the Nigerian economy.

The composite PMI stood at 52.1 points in May 2025, a point below 52.2 points recorded in April 2025.

A breakdown from domestic sources showed that inflows from exporters-importers jumped from $655.7 million to $3.11 billion.

Inflows from non-bank corporates increased marginally from $1 billion to $1.11 billion, while those from individuals spiralled from $15.1 million to $91.4 million.

However, inflows from the CBN halved from $1.35 billion in April to $649.80 million in May 2025.

Notably, inflows from foreign portfolio investors (FPIs) rose by 61.3 per cent to $880.80 million, underlining increased foreign participation in the Nigerian market.

Other foreign corporations grew by 10 per cent $83.9 million.

However, inflows from foreign direct investments (FDIs) dipped marginally by 6.3 per cent to $32.9 million.

Analysts at Cordros Capital Group said the business expansion and inflows were driven by an improved macroeconomic outlook.

According to analysts, foreign exchange inflows will continue to improve, supported by growing market confidence.

They, however, warned that the lingering global trade uncertainties remain a downside risk to robust inflows from the foreign counterparts, potentially constraining growth in overall forex liquidity.

“Looking ahead, we expect sustained expansion in private sector activity, underpinned by improving macroeconomic fundamentals such as a more stable naira and moderating inflation.

“Nonetheless, tight financial conditions remain a potential headwind to broader economic performance in the near term,” Cordros Capital stated.

Billionaire businessman and Chairman, BUA Group, Alhaji Abdulsamad Rabiu, said that within two years, Nigeria has recorded tangible and accelerated progress under President Tinubu.

He pointed to the administration’s infrastructure rollout as evidence of the government’s commitment to innovation and national development.

Rabiu said President Tinubu is driving Nigeria on the path of accelerated growth and development.

He said: “Under your leadership, we have witnessed real and rapid progress.”

Global credit ratings agency, Moody’s Investors Service, two weeks ago upgraded Nigeria’s sovereign rating from Caa1 to B3, citing substantial gains from the government’s macroeconomic reforms.

Highlighting improvements in the country’s external and fiscal positions, Moody’s also adjusted Nigeria’s economic outlook from positive to stable.

Both upgrades were premised on the Tinubu Administration’s reforms, including foreign exchange (forex) reforms, improved fiscal position and positive balance of payment.

Moody’s stated that the improved rating was based on “a more resilient fiscal position, stronger external accounts, and the government’s demonstrated commitment to macroeconomic and structural reforms.”

While remaining cautious, Moody’s was confident about the sustainability of the ongoing reforms.

“The upgrade reflects increased confidence in the government’s broad commitment to policy reforms implemented since its move to orthodox economic policies in June 2023, including exchange rate liberalisation, monetary policy tightening, and steps to end deficit monetisation and remove fuel subsidies.

“These have improved policy coherence and credibility and reduced economic distortions and near-term risks to macroeconomic stability, enhancing resilience in the context of persistent domestic challenges and heightened external risks,” Fitch stated in the April 2025 rating report.

According to Fitch, the “Stable Outlook” reflected the expectation that the macroeconomic policy stance would sustain improvements in the functioning of the forex market and support the move to lower inflation, although it would likely remain far higher than rating peers.

Fitch also anticipated “a continued reduction in external vulnerabilities through further easing of domestic foreign currency supply constraints, while renewed energy sector reforms should help sustain current account surpluses.”