Nigeria's foreign exchange (FX) market witnessed a significant boost in January 2026, with inflows hitting $3.0 billion, according to data released by FMDQ. This represents a 7% month-on-month increase, marking the second consecutive month of recovery in FX supply. The surge is largely attributed to foreign portfolio investors (FPIs) seeking high returns in Nigeria’s fixed-income market.

The increase in FX inflows 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. Portfolio inflows more than doubled during January, underscoring the influence of short-term capital in shaping liquidity conditions.

Nigeria’s high-yield environment, supported by tight monetary policy and attractive sovereign debt returns, continues to anchor external participation in the FX market. Elevated interest rates have enhanced Nigeria’s appeal among global investors searching for yield, particularly within treasury bills and bond instruments.

Improved FX liquidity has also lessened the immediate need for heavy official intervention, supporting a more market-driven supply dynamic. With offshore inflows strengthening, reliance on the Central Bank of Nigeria (CBN) declined significantly in January. However, 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.

This positive development has boosted Nigeria’s external reserves, which rose to about $46 billion by late January 2026, marking the highest level in roughly eight years. Continued FX inflows through 2026 could further ease pressure on the naira and gradually reduce the need for official intervention. Converting short-term portfolio flows into durable investment commitments remains a broader structural challenge for the Nigerian economy.