The inflow of foreign exchange into the economy has peaked at a six-year high following a series of reforms from the Central Bank of Nigeria (CBN) that triggered offshore investors’ sentiment into the economy of Africa’s biggest oil producer.

From stable naira to moderating inflation figures, the macroeconomic indicators have strengthened, creating room for stronger dollar inflows from $3.67 billion in April 2025 to $5.96 billion in May 2025. Analysts point out that FX inflows will continue to improve, supported by growing market confidence from domestic and offshore investors.

Nigeria is witnessing improving macroeconomic fundamentals as forex inflows from major sources into the Nigerian Foreign Exchange Market (NFEM) rose to a six-year high. The surge in FX inflows was triggered by major reforms instituted by the Central Bank of Nigeria (CBN) and the impact of the reforms on key economic indicators.

Data from FMDQ indicated that total inflows into the NFEM rose by 62 percent from $3.67 billion in April 2025 to $5.96 billion in May 2025. The upsurge was driven largely by a substantial increase in inflows from both domestic and foreign sources.

Domestic sources, which accounted for 83.2 percent of total inflows, jumped by 64.2 percent from $3.02 billion to $4.96 billion, its highest in six years. Foreign sources, which accounted for 16.8 percent of total inflows, also rose by 51.7 percent from $657.40 million to $997.60 million, its highest in three months.

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 rose from $15.1 million to $91.4 million. Notably, inflows from foreign portfolio investors (FPIs) rose by 61.3 percent to $880.80 million, underlying increased foreign participation in the Nigerian market.

Bismarck Rewane, managing director, Financial Derivatives Company Limited, said Nigeria’s economy is expected to recover further in the coming months. Inflation is expected to ease to 23.15 percent in June, with first quarter 2025 real Gross Domestic Product (GDP) growth projected at 3.4 percent. The naira is likely to trade strengthened, reflecting improved FX market stability.

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

Global credit ratings agency Moody’s Investors Service recently 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.

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.”

“The stable outlook reflects our expectations that external and fiscal improvements will decelerate but will not reverse entirely.”

The latest sovereign rating report came on the back of a report by Fitch Ratings, a leading global credit rating agency, which upgraded Nigeria’s rating from “B-“ to “B”. Fitch also declared the macroeconomic outlook “stable”.

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.

The naira has appreciated, trading at N1,553 against the dollar in the official foreign exchange market, stronger than N1,600 at the parallel market, with the possibility of convergence in no distant time.

Data from the Central Bank of Nigeria showed the naira has been on a steady appreciation, trading at ₦1,579.27 at the beginning of last week and closing stronger at the current rate.

The CBN has, in recent months, activated multiple FX sources to increase dollar inflows, boost dollar access to manufacturers and retail end users and support naira recovery across markets.

From moves to improve diaspora remittances through new product development, the granting of licences to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller FX model, and enabling timely access to naira liquidity for IMTOs, the apex bank has simplified dollar-inflow channels for authorised dealers and other players in the value chain.

Given that FX inflows to the economy are strategic in achieving monetary and fiscal policy stability, the CBN under its governor, Olayemi Cardoso, puts in a lot of effort in attracting more inflows into the economy.

Diaspora remittances to Nigeria, estimated at $23 billion annually, remain a reliable source of forex to the domestic economy. There are also other sources and policies that are being explored by the apex bank to keep dollar inflows coming.

The CBN’s initiatives have supported continued growth in these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year.

The remittances in the economy are expected to increase based on CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability, which is essential for sustained economic growth.

Charlie Bird, director of trading at Verto, said the dollar liquidity dynamic is now more balanced, with foreign investors and airlines able to repatriate funds.

Speaking during the Cordros Asset Management seminar titled “The Naira Playbook”, he said Nigeria is now the darling of foreign investors because of improved dollar liquidity in the economy due to positive CBN reforms.

For instance, the CBN under Cardoso recently announced the introduction of two new financial products designed to serve Nigerians living abroad and attract more diaspora remittances.

These and other measures, including the granting of licences to new International Money Transfer Operators (IMTOs), implementing a willing buyer-willing seller model, and enabling timely access to naira liquidity for International Money Transfer Operators (IMTOs).

Nigeria’s annual inflation rate eased to 23.71 percent in April from 24.23 percent in March 2025, the National Bureau of Statistics (NBS) said.

The statistics office said the April 2025 headline inflation rate showed a decrease of 0.52 percent compared to the March 2025 headline inflation rate.

On a year-on-year basis, the headline inflation rate was 9.99 percent lower than the rate recorded in April 2024 (33.69 percent).

This, it said, shows that the headline inflation rate (year-on-year basis) decreased in April 2025 compared to the same month in the preceding year.

According to the NBS, on a month-on-month basis, the headline inflation rate in April 2025 was 1.86 percent, which was 2.04 per cent lower than the rate recorded in March 2025 (3.90 percent).

“This means that in April 2025, the rate of increase in the average price level is lower than the rate of increase in the average price level in March 2025,” it said.

Furthermore, the food inflation rate in April 2025 was 21.26 per cent on a year-on-year basis. This, it said, was 19.27 percentage points lower compared to the rate recorded in April 2024 (40.53 percent).

Nigeria has experienced a sharp increase in food prices in recent years. This trend worsened in 2023 following President Bola Tinubu’s removal of petrol subsidies and adoption of a floating exchange rate for the naira.

The statistics office said the percentage change in the average CPI for the twelve months ending April 2025 over the average for the previous twelve-month period was 28.5 percent, showing a 0.4 percent increase compared to the 28.1 percent recorded in April 2024.

Food inflation slowing

According to the NBS, the significant decline in the food annual inflation figure is technically due to the change in the base year.

However, it said, on a month-on-month basis, the food inflation rate in April 2025 was 2.06 percent, down by 0.12 percent compared to March 2025 (2.18 percent).

“The decrease can be attributed to the rate of decrease in the average prices of maize (corn) flour, wheat grain, dried okra, yam flour, soya beans, rice, Bambara beans, brown beans, etc.,” the NBS said.