Nigeria recorded a sharp 54.5 percent month-on-month decline in net foreign exchange (FX) inflows in August 2025, reflecting weaker dollar supply from autonomous sources amid rising outflows, according to the Central Bank of Nigeria’s (CBN) economic report for the month.
Data from the report showed that net FX inflows fell to $3.74 billion in August 2025 from $8.22 billion in July, underscoring a significant slowdown in overall FX liquidity entering the economy within the period. The decline was driven by a combination of lower aggregate inflows and higher aggregate outflows across the market.
Aggregate FX inflows declined to $7.09 billion in August from $10.67 billion in the preceding month, while aggregate outflows rose to $3.36 billion from $2.46 billion. This widening gap between inflows and outflows weakened the net FX position of the economy during the month.
FX flows through the CBN also reflected the softer liquidity conditions. Inflows through the Bank fell to $3.04 billion in August from $4.29 billion in July, while outflows increased to $1.94 billion from $1.37 billion in the preceding month. As a result, the CBN recorded a lower net inflow of $1.10 billion in August, compared with a net inflow of $2.92 billion in July.
A similar trend was observed in transactions conducted through autonomous sources, which include inflows from exporters, remittances, and other non-official channels. FX inflows through these sources declined to $4.05 billion in August from $6.39 billion in July, while outflows moderated slightly to $1.42 billion from $1.09 billion. Consequently, net inflows from autonomous sources dropped sharply to $2.64 billion, compared with $5.30 billion in the preceding month, accounting for the bulk of the overall decline in net FX inflows.
Despite the weaker net FX position, the naira recorded an appreciation at the Nigerian Foreign Exchange Market (NFEM) during the month. The average monthly exchange rate strengthened to N1,534.75 per $1 in August, compared with N1,530.35 per $1 in July, suggesting that policy support and market interventions helped cushion the impact of reduced inflows.
However, trading activity at the official market showed signs of slowing. Average daily FX turnover at the NFEM declined by 30.75 percent to $272.60 million in August, reflecting reduced participation and lower transaction volumes amid tighter FX supply conditions.
Analysts at FBNQuest noted that for much of 2025, elevated interest rates maintained by the CBN played a key role in supporting FX liquidity, as offshore investors seeking high-yielding instruments became a major source of dollar supply to the Nigerian market. According to them, this trend was reinforced by a softer global monetary policy environment.
They explained that the US Federal Reserve cut benchmark interest rates three times in 2025, amid signs of a cooling labour market and moderating inflationary pressures. This shift signalled a broader wave of monetary easing among advanced economies, creating a more favourable environment for capital flows into emerging markets such as Nigeria.
These external inflows, FBNQuest said, helped bolster Nigeria’s FX liquidity and supported relative stability in the naira, particularly at a time when FX earnings from traditional sources such as crude oil exports were under pressure due to softer global oil prices.
“Against this backdrop, we expect the CBN to maintain a cautious approach to policy rate cuts in 2026, aiming to preserve the attractiveness of domestic assets for offshore investors and mitigate the risk of renewed naira volatility,” FBNQuest analysts said.