Naira Falls Against Dollar as Foreign Investors Exit Nigerian Markets, FX Pressure Mounts
- Nigeria's naira depreciated by 0.20% amid growing dollar demand and reduced foreign portfolio inflows
- Foreign investors pull back as political uncertainty rises ahead of Nigeria's 2027 elections
- Domestic transactions rise, countering a 25.9% decline in foreign portfolio investment in May 2026
Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.
Nigeria's currency weakened across foreign exchange markets on Monday as growing demand for dollars and reduced foreign portfolio inflows piled pressure on the naira.
Data released by the Central Bank of Nigeria (CBN) showed the naira depreciated by about 0.20 per cent at the Nigerian Foreign Exchange Market (NFEM), closing at N1,383.6262 per US dollar, compared with N1,380.9329 recorded at the end of last week's trading session.
Source: Getty Images
The latest decline comes amid a wave of foreign investor exits from Nigeria's financial markets, raising concerns over sustained pressure on the country's foreign exchange reserves and liquidity.
Dollar demand intensifies despite higher market liquidity
According to the CBN's daily FX report, transactions at the official market were executed within a range of N1,377.50 to N1,390 per dollar as demand for foreign currency continued to outpace supply.
Although trading activity improved significantly, the stronger liquidity failed to halt the naira's decline.
Interbank turnover at the NFEM surged by more than 80 per cent to $223.94 million on Monday from $124.22 million recorded on Friday.
The sharp increase suggests commercial banks processed more international payment requests for customers, even as hard currency shortages continued to weigh on the market.
Market analysts said the absence of fresh CBN intervention means pressure on the naira is likely to persist, particularly as foreign exchange inflows into the official window remain subdued.
Foreign investors pull back from Nigerian assets
Analysts attributed the growing pressure on the naira to weakening foreign portfolio investment, driven partly by expectations that the US Federal Reserve will maintain a hawkish monetary policy stance.
Higher US interest rates typically make emerging market assets less attractive, prompting investors to move capital into safer dollar-denominated investments. Economists also pointed to increasing political uncertainty ahead of Nigeria's 2027 elections, which is encouraging a flight to safety among foreign investors.
The cautious sentiment has spilt into the Nigerian stock market, where investors are increasingly concerned that pre-election spending could fuel inflation and keep interest rates elevated for longer.
Foreign portfolio investment continues to decline
Recent data from the Nigerian Exchange (NGX) showed that foreign portfolio investment (FPI) fell for the second consecutive month in May 2026.
FPI transactions dropped 25.9 per cent month-on-month to ₦183.6 billion ($133.7 million) from ₦247.8 billion ($180.2 million) in April, accounting for just 9.5 percent of total market turnover, down from 13.7 per cent previously.
Despite the decline in foreign participation, overall market activity remained strong. Total turnover increased to ₦1.9 trillion ($1.4 billion) in May, supported by robust domestic investor participation.
Domestic transactions rose 13.2 per cent to ₦1.8 trillion, representing 90.5 per cent of total market activity.
Source: Getty Images
Looking ahead, CSL Stockbrokers Limited expects investor sentiment to improve on the back of Nigeria's anticipated reclassification into the FTSE Russell Frontier Market Index by September 2026 and the potential listing of Dangote Refinery on the Nigerian Exchange, developments that could help attract fresh foreign capital in the months ahead.
CBN releases new exchange rates as naira appreciates
We also highlighted facts about the Nigerian currency's recent mixed performance against the dollar in both the official and unofficial markets, with the naira appreciating by N5.74 in the former.
As the Central Bank of Nigeria continues to implement reforms aimed at enhancing transparency, the implications of these developments could significantly impact the country's economic landscape and foreign exchange stability.
Source: Legit.ng
