A tidal wave of foreign currency is sweeping into Nigeria, signalling a dramatic return of investor confidence after years of economic instability and flight, fresh data has revealed.
Figures released by the FMDQ Exchange show that total inflows into the Nigerian Foreign Exchange Market surged to a five-month high of $5.15 billion in October, a staggering 62.2 per cent increase from the $3.18 billion recorded in September. This remarkable upswing is being widely attributed to a series of aggressive reforms implemented by the Central Bank of Nigeria under its Governor, Olayemi Cardoso.
Since assuming office in September 2023, Cardoso’s CBN has embarked on a mission to clean up a market long plagued by distortions. The bank has moved to unify the country’s multiple exchange rates, clear a backlog of overdue foreign exchange obligations estimated at over $7 billion, and put an end to opaque interventions that bred uncertainty.
“Nigeria appears to be back in business as long-awaited economic reforms take shape,” a Portfolio Manager at East Capital was quoted as saying, capturing the budding optimism amongst international investors.
This renewed confidence is further corroborated by data from the National Bureau of Statistics, which reported that total capital importation for the first quarter of 2025 rose to $5.642 billion, a 67.12 per cent year-on-year increase from the $3.376 billion recorded in the same period of 2024.
However, a deeper look into the composition of these inflows reveals a potentially troubling narrative. While headline numbers are impressive, over 90 per cent of the capital, amounting to $5.204 billion, was classified as portfolio investment—essentially short-term, “hot money” chasing high-yield government securities like treasury bills.
In stark contrast, Foreign Direct Investment, which signifies long-term commitment to building factories and creating jobs, accounted for a paltry $126.29 million, or just two per cent of the total. This represents a steep 70.06 per cent quarter-on-quarter drop, indicating that foreign investors remain wary of making lasting bets on the Nigerian economy.
Analysts have been quick to sound a note of caution. They warn that this portfolio-driven surge, while beneficial for liquidity and naira stability, is highly vulnerable to sudden reversals should global interest rates shift or domestic policies waver.
Samir Gadio, Head of Africa Strategy at Standard Chartered Plc, acknowledged the positive drivers, stating, “Portfolio inflows have likely been supported by improved confidence amid key structural reforms, better FX market functioning, and moderating dollar–naira volatility, as well as the still-robust nominal yield buffer.” He added that Nigeria’s market is seen as “less correlated with global risk conditions than more liquid EM peers.”
Banks Emerge as Major Beneficiaries
The banking sector has emerged as the primary conduit and beneficiary of these financial inflows. The NBS confirmed that banks received more than half of all capital importation in the first quarter, attracting $3.127 billion. This aligns with the CBN’s push for a stronger financial system to underpin the Federal Government’s ambitious target of building a $1 trillion economy by 2030.
A recent industry report from Agusto & Co projected that an additional N900 billion is expected to be injected into the Nigerian banking sector this financial year as institutions scramble to meet new recapitalisation deadlines set by the CBN.
Sustainability Hinges on Deeper Reforms
The International Monetary Fund has praised Nigeria’s economic reforms, citing declining inflation, naira stability, and rising foreign reserves as positive outcomes. The CBN Governor has consistently argued that stability is the key to unlocking sustainable investment.
“Stability is at the core of advancing Nigeria’s policy framework,” Cardoso stated at a recent executive seminar in Abuja. “Investors run away from a lack of predictability. The more predictability you have, the more incentive investors have to come to your market.”
He emphasised that with strong fundamentals, “you don’t have to beg anybody to come and invest. Investors naturally gravitate to where there is stability and predictability.”
Yet, the challenge remains. Speaking at the Lagos Business School, Cardoso hinted at the task ahead, stressing the need to ensure that “these hard-won gains translate into durable prosperity, especially for the next generation.”
He issued a clear charge to commercial banks, declaring, “An FX market defined solely by when and how the Central Bank buys or sells dollars is inadequate for a dynamic economy like Nigeria’s. Now is the time for banks to step up to their market-making responsibilities.”
