Despite Optimism, Forex Inflow Declines By 20.9% In July

Though analysts remained optimistic that liquidity within the overseas alternate market can be strong, complete inflows into the Nigerian Overseas Alternate Market (NFEM) declined for the second consecutive month in July 2025.

Therefore, it fell by 20.9 per cent month-on-month after a 28.1 decline in June. That is because the 30 days transferring common of the nation’s overseas reserves elevated for the fourth consecutive week, rising by 1.53 per cent or $593.75 million week-on-week to $39.36 billion as of July 30, 2025, in accordance with knowledge by the Central Financial institution of Nigeria (CBN).

The naira had additionally regained worth in the midst of final week appreciating barely by 0.06 per cent week-on-week to shut at N1,533.74 to the greenback, supported by improved foreign exchange liquidity and continued CBN intervention,  as rising demand from holiday-bound travellers pushed down its worth on the parallel market by 0.13 per cent.

Knowledge from FMDQ confirmed that influx into the NEFM slowed additional to $3.83 billion, down from $4.84 billion recorded in June. This growth was largely pushed by vital reductions in overseas and home foreign money contributions.

Overseas sources, which accounted for 45.8 per cent of complete inflows in July, noticed a steep decline of 35.6 per cent to $1.75 billion, in comparison with $2.73 billion within the previous month. This decline was notably pronounced within the Overseas Direct Funding (FDI) phase, which plunged by 79.8 per cent. Different main declines have been recorded in company inflows which was down by 60.1 per cent and Overseas Portfolio Investments (FPIs), which dipped 34.8 per cent month-on-month.

In the meantime, inflows from home sources, which made up 54.2 per cent of the entire, fell marginally by 1.9 per cent to $2.07 billion in July, as towards $2.11 billion recorded in June. The modest decline was largely attributed to a 30.1 per cent drop in Exporters/Importers’ contributions.

Nonetheless, this was partially offset by elevated inflows from people which rose by 117.5 per cent, the CBN elevated influx by 77.8 per cent, and non-bank corporates with 5.4 per cent elevated influx.

Regardless of the decline, analysts stay optimistic in regards to the near-term outlook for foreign exchange inflows, anticipating complete inflows to surpass the 2024 full-year common of $2.51 billion.

Analysts at Cordros Analysis attributed this to rising market confidence and “still-attractive naira yields, notably for overseas portfolio buyers. “We preserve our optimism on the naira as foreign exchange liquidity is poised to stay strong. Elevated yields within the OMO market, coupled with a weaker greenback, will seemingly maintain inflows from FPIs. Furthermore, lowered incentives for naira hypothesis and stronger confidence within the foreign exchange framework are supporting native supply inflows.”

Additionally, analysts at Cowry Asset Administration mentioned, they anticipated the naira to stay steady throughout each official and parallel market ends because it warned of persistent stress within the parallel market, even because the official window stays supported.

“We anticipate the naira to commerce inside a comparatively steady band throughout each the official and parallel home windows, aided by ongoing CBN interventions and wholesome reserve buffers. Nonetheless, seasonal greenback demand, particularly from outbound travellers, could proceed to exert some stress on the unofficial market.”

Within the forwards market, the worth of the naira appreciated throughout all tenor contracts. The 1-month contract appreciated by 0.6 per cent to N1,567.61/$; the 3-month appreciated 1.2 per cent to N1,627.53/$; the 6-month gained 2.5 per cent to N1,714.93/$; whereas the 1-year contract rose 4.4 per cent to N1,884.07/$.