Central Bank’s Liquidity, For December, Drives 38% Increase In Dollar Inflows
By Elegbede Abiodun
This change believed to have been largely driven by heightened activity by the CBN in the foreign exchange deals.
Dollar supply rebounded by 38 percent month on month in December 2025 as increased foreign exchange sales by the Central Bank of Nigeria (CBN) helped support market liquidity, data from FMDQ showed.
Total foreign exchange inflows into the FX market rose sharply by 38 percent month on month to $2.8 billion in December 2025, marking a rebound from the much steeper 67 percent contraction recorded in the previous month. Despite the recovery, FX supply in December was still the second weakest level recorded over the past 16 months, underscoring lingering fragilities in inflows. Apart from inflows from domestic corporates, which declined by 5 percent month on month to $420 million, all other FX supply sources recorded improvements during the period.
Analysts at FBNQuest said the rebound in FX supply was largely driven by heightened activity by the CBN in the foreign exchange market. FX sales by the apex bank rose significantly to $654 million in December, compared with $318 million sold in the previous month. According to the analysts, the CBN’s more active presence reflects efforts to bolster market liquidity amid subdued participation from offshore investors, whose inflows have remained weak.
Foreign portfolio inflows increased modestly by 7 percent month on month to $632 million in December, a sharp slowdown compared with the strong $3.5 billion recorded in October. The relatively weak portfolio inflows point to reduced risk appetite toward the end of the year, a period when foreign investors typically scale back deployable liquidity while focusing on profit taking and portfolio rebalancing.
“We expect renewed investor activity in the coming months, which should drive stronger momentum in inflows, supported by attractive domestic carry trade opportunities,” FBNQuest analysts said.
The naira closed largely flat on Thursday, easing marginally by 0.1 percent after sustaining gains since the start of trading in the year. Data from the CBN showed that the naira depreciated slightly by N1.45, with the dollar quoted at N1,419.71 on Thursday compared with N1,418.26 on Wednesday at the Nigerian Foreign Exchange Market.
In the parallel market, also known as the black market, the naira traded flat at N1,490 to the dollar, unchanged from levels seen on Wednesday, Tuesday and Monday.
Nigeria’s external reserves, which provide the CBN with the capacity to intervene in the FX market and moderate exchange rate volatility, also recorded a modest improvement. Data published on the CBN’s website showed that reserves rose to $45.64 billion as of January 7, 2026, from $45.62 billion the previous day.
On the foreign inflow components, foreign direct investment, the smallest segment, more than doubled to $50.1 million in December, rising by 381.7 percent from $10.4 million in the preceding month. On the domestic side, FX contributions from exporters and importers, as well as individuals, supported the month on month rebound, rising by 49 percent and 88 percent to $683 million and $275.3 million, respectively.
According to Olayemi Cardoso, governor of the CBN, the introduction of the Nigerian Foreign Exchange Code has established clear standards for transparency, ethics, governance and fair dealing among authorised dealers. He said the deployment of the Electronic Foreign Exchange Matching System, powered by Bloomberg BMatch, has fundamentally transformed FX trading through mandatory order submission, real-time regulatory visibility and improved price discovery. These reforms, Cardoso said, have reduced opacity and manipulation, restored discipline, and narrowed the gap between the official and parallel exchange rates to under 2 percent from more than 60 percent previously.
Looking ahead, FBNQuest analysts said softer inflation expectations could allow for a more accommodative monetary policy stance in 2026. While offshore participation is expected to remain measured, it should be supported by the Monetary Policy Committee’s gradual easing path and the continued attractiveness of Nigerian yields. They added that Nigeria’s investment appeal could also benefit from a more dovish policy stance by the United States Federal Reserve in 2026, which could lift global risk appetite and support stronger capital inflows into emerging markets.
