Nigeria’s external reserves have continued to accumulate, pushing the value of the naira to appreciate at both the official and parallel ends of the market. The Nigerian Foreign Exchange Market (NFEM) recorded an inflow of $2.8 billion in August.
According to data by the Central Bank of Nigeria (CBN), gross reserves rose for the ninth consecutive week, recording a week-on-week increase of $232.11 million or 0.56 per cent to $41.499 billion as of September 3, 2025, compared to $41.2267 billion, which it closed last month.
The naira appreciated by 1.01 per cent last week, and analysts project that the upward momentum will be sustained. Steady reserve accretion provides a vital buffer against external shocks, particularly oil price volatility and speculative pressures.
Meanwhile, data from FMDQ showed that total inflows into the Nigerian Foreign Exchange Market (NFEM) fell by 26.9 per cent month-on-month to $2.80 billion in August, compared to $3.83 billion in July. The decline reflected weaker participation across both foreign and local sources.
Foreign inflows dipped to a four-month low of $1.06 billion, down 61 per cent month-on-month, as foreign portfolio investments (FPIs) slumped by 65.8 per cent and foreign direct investment (FDI) dropped by 25.2 per cent. The contraction was, however, cushioned by a sharp 165.5 per cent increase in inflows from corporates.
On the domestic side, inflows stood at $1.74 billion, representing a 17.9 per cent drop from July levels. The moderation was largely due to declines from exporters and importers (-32.8 per cent) and non-bank corporates (-32.7 per cent). These declines overshadowed strong inflows from individuals, which rose by 413.8 per cent, and from the CBN, which posted a 118.9 per cent increase.
Despite the slowdown, optimism remains strong, as analysts at Cordros Research say they expect inflows to remain robust in the near term.
“We expect foreign exchange inflows from both local and foreign sources to remain strong, surpassing 2024 levels, supported by improving market confidence and still-attractive naira yields for foreign portfolio investors.”
Last week, the value of the naira on the Nigerian Autonomous Foreign Exchange Market (NAFEM) closed at N1,514.87 to the dollar, driven by improved liquidity and dollar supply from FPIs participating in the OMO Primary Market Auction and a $15 million intervention by the CBN.
The parallel market also recorded modest improvement, with the naira strengthening by 0.02 per cent to an average of N1,538 to the dollar, as trader confidence improved and speculative pressures eased.
Analysts at Cowry Asset Management explained that the build-up enhances the CBN’s capacity to stabilise the market: “The incremental build-up in external reserves provides an important cushion for the economy while equipping the CBN with greater capacity to smoothen volatility in the foreign exchange market.”
However, pressure was visible in the forwards market, where the naira weakened across tenors. The one-month contract closed at N1,572.31, the three-month contract at N1,646.72, the six-month contract at N1,751.58, and the one-year contract at N1,952.87, indicating investor caution over longer-term stability.
