As the market resumes after the public holidays, the Central Bank of Nigeria (CBN) is expected to continue its interventions in its bid to support market liquidity despite weak foreign portfolio investment (FPI) participation.
According to analysts at Cordros Research, this will help maintain the naira’s stability at current levels in the short term.
The official FX rate had on Friday depreciated by 0.5 per cent to N1,538.70/$1 even as the CBN intervened in the market by selling $69.50 million to authorized dealers. Meanwhile, gross FX reserves declined for the second consecutive week by $913.14,000 week-on-week (w/w) to $38.33 billion (March 27). In the forwards market, the naira rates increased across the 1-month (+0.5 per cent to N1,572.44/$1), 3-month (+1.3 per cent to N1,635.09/$1), 6-month (+2.4 per cent to N1,727.16/$1) and 1-year (+4.8 per cent to N1,899.27/$1) contracts.
Reacting in its weekly assessment of the market, Cordros Research said, “The CBN is expected to continue supporting market liquidity amid weak FPI participation in the FX market. This will help maintain the naira’s stability at current levels in the short term.
However, risks of currency volatility persist, driven by global uncertainties, including potential trade tensions following US tariff hikes and retaliatory measures from affected countries. These factors could trigger capital outflows as foreign investors seek safer assets”.
Concerns over foreign exchange volatility, capital repatriation challenges, and policy uncertainties have deterred foreign participation as the domestic and foreign participation transaction report from the Nigerian Exchange Limited (NGX) revealed that foreign investors accounted for only 15 per cent of total transactions in the Nigerian equities market in 2024, with domestic investors dominating 85 per cent of activities.
In January 2025, foreign outflows from the Nigerian stock market significantly exceeded inflows, with N45.85 billion withdrawn compared to N25.66 billion in inflows, reflecting ongoing capital flight.
FPI as a percentage of GDP fell from 10 per cent in June 2024 to 4.3 per cent in September 2024, further highlighting declining foreign investment confidence.
The CBN has taken steps to stabilize liquidity through mechanisms like the Standing Lending Facility (SLF) and Standing Deposit Facility (SDF). Loans to banks reached N1.2 trillion in early 2025, the highest in five years, indicating significant liquidity constraints.