Nigeria Sees Decline in Foreign Exchange Inflows, But Naira Strengthens Against Dollar in January 2025

Nigeria’s foreign exchange landscape showed mixed trends in January 2025, with net inflows declining, largely due to reduced contributions from the Central Bank of Nigeria (CBN). According to the CBN Economic Report for January 2025, released on April 17, total net foreign exchange inflows dropped by 4.49% to $4.79 billion from $5.01 billion in December 2024.

Key Figures: Foreign Exchange Inflows and Outflows

In total, foreign exchange inflows fell to $9.63 billion in January 2025, compared to $10.17 billion in December. At the same time, outflows declined to $4.84 billion from $5.17 billion over the same period.

A closer look at the components of foreign exchange reveals that inflows through the CBN plummeted to $2.33 billion in January from $4.09 billion in December. However, autonomous foreign exchange inflows saw an uptick, rising to $7.31 billion from $6.08 billion.

On the outflow side, CBN-related outflows dropped to $3.80 billion from $4.16 billion. Autonomous outflows saw a slight increase, climbing to $1.04 billion from $1.01 billion.

Net Foreign Exchange Flows: A Shift in Dynamics

The data shows a net outflow of $1.47 billion through the CBN in January, a stark contrast to the marginal net outflow of $0.07 billion recorded in December 2024. On the other hand, autonomous sources recorded a net inflow of $6.26 billion, a significant rise from the $5.07 billion noted in December.

Naira Strengthens, Exchange Rate Improves

Despite the overall decline in foreign exchange inflows, the naira showed strength in the foreign exchange market. The average exchange rate appreciated by 1.16%, moving from N1,553.73 per USD in December 2024 to N1,535.94 per USD in January 2025.

At the end of the period, the exchange rate improved by 3.90%, closing at N1,478.22 per USD, up from N1,535.82 per USD in December.

Additionally, there was a notable increase in foreign exchange turnover, which rose by 18.30%, reaching $408.49 million in January 2025, compared to $345.30 million in December 2024. This spike in turnover indicates increased market activity and better liquidity in the forex market.

What It Means for Nigeria’s Economy

While the drop in CBN-related foreign exchange inflows presents challenges for Nigeria’s balance of payments and foreign exchange reserves, the rise in autonomous inflows signals growing private-sector involvement. This could help cushion the impact of reduced government-driven foreign exchange contributions.

The appreciation of the naira against the US dollar offers a silver lining, potentially stabilizing import costs and boosting purchasing power. However, the fluctuations in both inflows and outflows underscore the need for ongoing monitoring of Nigeria’s foreign exchange dynamics to ensure long-term economic stability.