Foreign portfolio investors (FPIs) lifted Nigeria’s foreign exchange inflows to $3.0 billion in January 2026, a 7% month-on-month increase, as elevated domestic yields continued to attract offshore capital.
According to data released by FMDQ, the improvement marks the second consecutive month of recovery in FX supply.
The development reinforces signs of gradually strengthening liquidity conditions that began to emerge toward the end of 2025, with portfolio flows playing a central role in stabilising the market.
What the data is saying
FMDQ data show that the 7% month-on-month rise in FX inflows to $3.0 billion in January was largely driven by foreign portfolio investors seeking high returns in Nigeria’s fixed-income market.
Portfolio inflows more than doubled during the month, underscoring the influence of short-term capital in shaping liquidity conditions.
- Foreign portfolio investment inflows surged by 151% month-on-month to $1.6 billion.
- About 98% of total portfolio inflows, equivalent to roughly $1.5 billion, was channelled into fixed-income securities, while equities attracted $38.7 million.
- International corporate inflows rose 83% to $155.4 million, while foreign direct investment edged up marginally by $2 million to $50.3 million.
- Offshore capital accounted for the bulk of FX supply growth, even as domestic sources weakened overall.
The data indicate that Nigeria’s high-yield environment, supported by tight monetary policy and attractive sovereign debt returns, continues to anchor external participation in the FX market.
More insights
The surge in portfolio inflows highlights the decisive role of short-term capital flows in sustaining FX liquidity.
Elevated interest rates have enhanced Nigeria’s appeal among global investors searching for yield, particularly within treasury bills and bond instruments.
- The domestic fixed-income market absorbed nearly all portfolio inflows, reinforcing its dominance as the primary destination for foreign capital.
- The equities market remained a marginal beneficiary of offshore flows during the month.
- Stronger external participation reduced pressure on the currency market and moderated volatility in the naira.
Improved FX liquidity has also lessened the immediate need for heavy official intervention, supporting a more market-driven supply dynamic.
Why this matters
With offshore inflows strengthening, reliance on the Central Bank of Nigeria (CBN) declined significantly in January.
- The CBN contributed just $34 million to FX supply, down sharply from $654 million recorded in December.
- Domestic exporter inflows fell 15% month-on-month to $582 million.
- Inflows from individuals declined 39% to $168.7 million.
- Non-bank corporates recorded a modest 2.4% increase in inflows to $430.4 million, accounting for about 14% of total market supply.
The evolving composition of FX supply signals growing dependence on foreign capital rather than domestic sources or official intervention.
While this shift supports near-term liquidity, the sustainability of the trend hinges on continued investor confidence and policy consistency.
What you should know
Nigeria’s foreign exchange market has shown strengthening signs in early 2026, building on improved liquidity conditions observed toward the end of 2025.
This has boosted Nigeria’s external reserves, which rose to about $46 billion by late January 2026, marking the highest level in roughly eight years.
- The reserve build-up reflects stronger external inflows and improved FX buffers compared with earlier periods of volatility.
- Earlier episodes of subdued FX inflows had heightened pressure on the naira due to lower liquidity.
- Recent reserve gains have coincided with relative currency stability and renewed investor confidence.
- Sustained participation from foreign investors, particularly in fixed-income markets, alongside stronger reserves, provides monetary authorities with greater policy flexibility.
Continued FX inflows through 2026 could further ease pressure on the naira and gradually reduce the need for official intervention, though converting short-term portfolio flows into durable investment commitments remains a broader structural challenge.
