CBN Cuts FX Sales by 60% on Improved Offshore Forex Inflows

By Adedapo Adesanya

The Central Bank of Nigeria (CBN) significantly reduced its intervention in the Nigerian foreign exchange in October 2025, cutting FX sales by about 60 per cent month-on-month (MoM) to $106 million.

This scale back signals improving confidence in the market’s ability to sustain liquidity without heavy policy support, following a strong rebound in total FX inflows.

The moderation in CBN participation comes on the back of a sharp recovery in total FX inflows, which surged by 91 per cent month-on-month to approximately $6.1 billion, the highest level since May 2025, according to Proshare.

The resurgence was driven largely by renewed foreign investor appetite for Nigerian assets, supported by attractive carry-trade opportunities created by wide interest rate differentials between Nigeria and the United States after recent US Federal Reserve policy easing.

The apex bank’s reduced intervention reflects strengthening FX conditions driven largely by hot money flows and more active domestic participation, with inflation easing for yet another month below 20 per cent to 18.02 per cent.

Offshore inflows more than doubled, rising by 161 per cent month-on-month to $3.5 billion and accounting for nearly 58 per cent of total inflows.

Fixed-income instruments attracted $3.4 billion flowing into the segment as investors sought higher-yielding opportunities in Nigeria’s debt market.

With FX liquidity improving meaningfully from this offshore resurgence and stronger domestic activity, the CBN found less need to supply dollars into the market.

The lender’s reduced intervention is widely viewed as a positive step toward restoring market-driven price discovery and easing pressure on external reserves.

Domestic FX contributions also played a supporting role. Retail participation grew robustly, with inflows from individuals jumping to $602 million from just $104 million in the previous month. Market analysts noted that this is an indication of improved market access and rising confidence among local participants.

Corporate remittances and flows from exporters and importers also increased by 25 per cent and 60 per cent month-on-month respectively, adding further depth to the market.

However, weak Foreign Direct Investment (FDI) performance remains a lingering concern. FDI inflows declined by 25 per cent month-on-month to $222 million. This indicates continued worry around structural issues such as insecurity, regulatory unpredictability, and policy inconsistency.

Analysts have also warned that the sustainability of gains seen in previous months will depend on maintaining investor confidence and addressing barriers to long-term capital inflows.