Central Bank of Nigeria’s (CBN’s) most recent quarterly economic report shows that the total foreign exchange (FX) inflow to the Nigerian economy increased by 4% quarter-on-quarter (QoQ) and 26% year-on-year (YoY) to US$29bn in Q1 2025.
As illustrated in the chart below, FX inflows into the economy have steadily risen since Q4 2023, largely driven by the restrictive monetary policies implemented by the CBN.
However, compared with FX inflows, FX outflows increased at a faster rate of 14% QoQ (+33% YoY) to US$13.8bn, marking the highest value of outflows since Q2 2020.
Combined, the inflows and outflows resulted in a net FX flow of US$15.2bn, slightly lower than the US$15.8bn recorded in Q4 2024.
The primary driver of FX inflows was inflows from autonomous sources, which increased to US$20.7bn from US$16.3bn in Q4 2024, the highest level since the COVID-19 pandemic, although still below the US$27.5bn recorded in Q1 2020.
The rise in autonomous FX inflows was underpinned by elevated market interest rates, which encouraged carry trade flows, as well as the CBN’s FX market reforms, which have enhanced transparency and price discovery in the official FX market.
Although the CBN does not provide a breakdown, data from the FMDQ Group used as a proxy indicates that FPI inflows expanded by 40% QoQ and 101% YoY to US$4.9bn.
In contrast to autonomous inflows, inflows through the CBN declined to US$8.3bn from US$11.5bn in Q4 2024.
Turning to FX outflows, FX outflows through the CBN accounted for roughly 77% of the total value of outflow and remained stable at US$10.5bn, principally driven by external debt service payments, which increased by 29% YoY to US$1.4bn per CBN data.
However, FX outflow through autonomous sources grew by 125% QoQ to US$3.2bn.
Thanks to the CBN’s reforms, the strong growth in FX inflows from autonomous sources has contributed to notable exchange rate stability this year. The naira mostly traded within a range of N1,500–N1,600.
Looking ahead, potential monetary easing by the US Federal Reserve, combined with the improved functioning of the FX market, could support stronger FPI inflows—particularly if the CBN sustains its contractionary monetary policy stance.
Credit: FBNQuest Research
