Naira on Bullish Run despite 21% Drop in Dollar Inflow to FX Market
- The naira starts 2026 strong despite a 20.67% decline in FX inflows to the foreign exchange market
- Local sources supplied 82.95% of FX, cushioning foreign inflow drops, amid robust interventions by the CBN
- Naira appreciates 0.88% at official window while sinking in parallel markets, creating wider disparities between the two windows
The naira kicked off 2026 on a bullish note, defying a sharp slowdown in the United States dollar inflows to Nigeria’s foreign exchange market.
Despite a 20.67% week-on-week decline in total FX inflows, the local currency posted modest gains at the official window, supported largely by Central Bank of Nigeria intervention and subdued demand.
Source: Getty Images
Data from Coronation Merchant Bank’s research subsidiary show that total dollar flows into the Nigerian Foreign Exchange Market fell to $593.70 million from $748.40 million in the preceding week.
Analysts attributed the decline to softer market activity typical of the early weeks of the year and reduced participation from offshore investors.
Local sources dominate FX supply
Even as headline inflows weakened, local sources continued to anchor FX supply in the official market. Coronation Research said domestic inflows accounted for 82.95% of total FX supply during the week under review.
Individuals led local contributions with $165.1 million, followed by the CBN, which supplied $128.0 million.
Exporters and importers also played a significant role, providing $115.6 million to the market.
The strong showing from domestic players helped cushion the impact of falling foreign inflows and supported relative stability at the official window.
Foreign inflows slump sharply
On the external front, foreign participation remained weak. Foreign portfolio investors accounted for just 17.05% of total FX inflows, underscoring continued caution among offshore investors.
FPIs plunged by 72.91% week on week to $46.0 million, down from $169.8 million previously. Foreign direct investment also fell sharply, declining by 81.87% to $7.0 million from $38.6 million in the prior week.
The persistent weakness in both FDI and FPI reflects lingering concerns about global risk sentiment and Nigeria’s investment climate.
Mixed performance across FX markets
The naira recorded a mixed performance across currency markets. At the official window, it strengthened marginally, closing the week at N1,430.85 per dollar, representing a 0.88% appreciation.
The currency also touched an intraday low of N1,424 per dollar early in the week, reflecting minimal FX pressure at the start of the New Year.
According to the CBN’s daily FX update, the official rate closed at N1,429.31 per dollar on Monday, gaining 11 basis points on the day.
FX traders said the movement reflected low corporate demand following heavy FX sales in 2025, rather than fresh CBN intervention.
In contrast, the parallel market told a different story. The naira depreciated by 1.45% to trade at about N1,490 per dollar, highlighting persistent demand pressures outside the official market framework.
Reserves edge higher, outlook stable
Nigeria’s external buffers offered additional support. Gross foreign exchange reserves rose by 0.58 percent to $45.50 billion, increasing by $264.56 million at the start of the year.
Looking ahead, analysts expect the naira to trade within a relatively stable range at the official window in the near term.
Continued CBN support, easing seasonal demand after year-end pressures, and low corporate FX demand are likely to underpin stability.
Source: Getty Images
In 2025, the CBN defended the naira aggressively, injecting an estimated $7.53 trillion into the FX market amid heavy demand pressures, particularly from foreign portfolio investors exiting Nigerian financial markets.
That backdrop continues to shape FX dynamics as 2026 begins, with stability at the official window offsetting weaker inflows and parallel market pressures.
Naira begins 2026 with massive gains
Legit.ng previously reported that Nigeria’s currency began 2026 with renewed strength, extending the relative calm achieved last year.
On the first trading day of the New Year, the naira appreciated to N1,430.84 per dollar at the official window, according to data from the Central Bank of Nigeria.
The early gain reflects momentum built in 2025, when aggressive FX interventions and reforms helped tame extreme volatility.
Proofreading by Kola Muhammed, copy editor at Legit.ng.
Source: Legit.ng
