The Central Bank of Nigeria (CBN) continues its relentless pursuit of price and exchange rate stability, twin pillars crucial for a thriving macroeconomic environment. Sustaining these roles demands astute policy implementation, designed to bolster the confidence of both domestic and foreign investors in the Nigerian economy. Recent months have offered encouraging signs, with a noticeable uptick in foreign exchange inflows, signaling the potential fruits of the CBN's strategic reforms.
A Surge in FX Inflows: A Glimmer of Hope
Analysis of foreign exchange inflows over the past few months reveals a significant positive trend. From May 2025 to date, Nigeria has attracted close to $6 billion in monthly inflows. A detailed industry report highlighted a remarkable 62.0% month-on-month surge in total inflows in May, reaching $5.96 billion. This impressive boost was primarily fueled by increased participation from both domestic and foreign investors.
This level of inflow is among the highest recorded in recent memory, suggesting improving market sentiment, a direct consequence of ongoing macroeconomic reforms and a relatively stable naira. The naira, at the close of the week, settled at N1,570/$ in the parallel market and N1,536/$ in the official market, resulting in a manageable rate gap of N34/$. Analysts at Financial Derivatives Company Limited, in a note to investors, attributed this rise in FX inflows to a surge in oil prices and the multiple inflow channels strategically created by the CBN.
CBN's Multi-pronged Approach to Bolster Dollar Inflows
The Central Bank of Nigeria has been proactive in activating various sources to enhance dollar inflows, aiming to improve dollar access for manufacturers and retail end-users, thereby supporting the naira's recovery across all markets. The apex bank's initiatives are diverse and impactful:
- Improving Diaspora Remittances: This involves developing new financial products and granting licenses to new International Money Transfer Operators (IMTOs). The CBN has also simplified dollar-inflow channels for authorized dealers by implementing a willing buyer-willing seller FX model and ensuring timely access to naira liquidity for IMTOs.
- Revised IMTO Guidelines: The CBN recently released reviewed guidelines for International Money Transfer Services in Nigeria. These guidelines signify a major shift in how IMTOs operate, reflecting the CBN’s commitment to enhancing transparency and efficiency in foreign exchange transactions and boosting diaspora remittances. A further circular, "New Measures to Enhance Local Currency Liquidity for Settlement of Diaspora Remittances," underscores the apex bank's dedication to improving Nigeria's foreign exchange market infrastructure by increasing formal remittance flows. It introduces measures that provide licensed IMTOs with access to Naira liquidity from the CBN, facilitating the disbursement of remittances to beneficiaries.
Given the strategic importance of FX inflows in achieving monetary and fiscal policy stability, the CBN, under the leadership of Governor Olayemi Cardoso, is actively dedicated to attracting more inflows into the economy.
The Resilience of Diaspora Remittances and Investor Confidence
Diaspora remittances to Nigeria, estimated at $23 billion annually, remain a consistent and vital source of foreign exchange for the domestic economy. The CBN's initiatives have significantly supported the continued growth of these inflows, aligning with the institution’s objective of doubling formal remittance receipts within a year. The expected increase in remittances is bolstered by the CBN’s ongoing efforts to restore public confidence in the foreign exchange market, strengthen the banking system, and promote price stability – all essential for sustained economic growth.
Charlie Bird, Director of Trading at Verto, noted that the dollar liquidity dynamic is now more balanced, allowing foreign investors and airlines to repatriate funds. Speaking at a Cordros Asset Management seminar titled "The Naira Playbook," he highlighted that Nigeria is now attracting foreign investors due to improved dollar liquidity, a direct result of the CBN's positive reforms. As an example, the CBN under Governor Cardoso recently introduced two new financial products specifically designed to serve Nigerians living abroad and attract more diaspora remittances.
Net FX Reserves Position: A Remarkable Leap
Under Governor Olayemi Cardoso's leadership, the Central Bank of Nigeria recently announced a significant increase in the net FX reserve position, reaching $23.11 billion at the end of last year. Upon assuming office in October 2023, Cardoso prioritized reforms to rebuild Nigeria’s economic buffers and enhance resilience. He inherited a foreign exchange market burdened by a backlog of over $7 billion in unfulfilled commitments and a fragmented FX regime with multiple exchange rates, which fostered arbitrage opportunities. This environment stifled much-needed foreign investment and led to a depletion of external reserves, which fell to $33.22 billion in December 2023.
"Over the past year, we have undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency," Cardoso stated. "This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets."
According to CBN data, the Net External Reserves (NFER) stood at $23.11 billion, marking its highest level in over three years. This represents a substantial increase from $3.99 billion at year-end 2023, $8.19 billion in 2022, and $14.59 billion in 2021. The NFER, which adjusts gross reserves for near-term liabilities such as FX swaps and forward contracts, is widely considered a more accurate indicator of the foreign exchange buffers available to meet immediate external obligations. Gross external reserves also saw an increase, reaching $40.19 billion, up from $33.22 billion at the close of 2023.
This increase in reserves reflects a combination of strategic measures implemented by the CBN, including a deliberate and substantial reduction in short-term foreign exchange liabilities, particularly swaps and forward obligations. The strengthening was also spurred by policy actions aimed at rebuilding confidence in the FX market and increasing reserve buffers, along with recent improvements in foreign exchange inflows, especially from non-oil sources. The result is a stronger and more transparent reserves position, better equipping Nigeria to withstand external shocks. This expansion occurred even as the CBN continues to reduce short-term liabilities, thereby improving the overall quality of the reserve position.
"This improvement in our net reserves is not accidental; it is the outcome of deliberate policy choices aimed at rebuilding confidence, reducing vulnerabilities, and laying the foundation for long-term stability,” Cardoso commented. “We remain focused on sustaining this progress through transparency, discipline, and market-driven reforms.”
Reserves have continued to strengthen in 2025. While the first quarter figures reflected some seasonal and transitional adjustments, including significant interest payments on foreign-denominated debt, underlying fundamentals remain intact, and reserves are expected to continue improving over the second quarter of this year. Going forward, the CBN anticipates a steady uptick in reserves, underpinned by improved oil production levels and a more supportive export growth environment expected to boost non-oil FX earnings and diversify external inflows. The CBN remains committed to prudent reserve management, transparent reporting, and macroeconomic policies that support a stable exchange rate, attract investment, and build long-term resilience.
Cultivating a Robust FX Ecosystem
Foreign capital inflows into the domestic economy remain crucial for achieving monetary and fiscal policy stability. The apex bank is actively cultivating more sources of foreign exchange to increase dollar inflows and enhance access for manufacturers and retail end-users. From efforts to boost diaspora remittances through new product development and granting licenses to new International Money Transfer Operators (IMTOs), to implementing a willing buyer-willing seller FX model and enabling timely access to naira liquidity for IMTOs, the CBN has significantly simplified dollar-inflow channels for FX dealers to stimulate business and economic growth.
Aminu Gwadabe, President of the Association of Bureaux De Change Operators of Nigeria (ABCON), remarked that these policy shifts demonstrate the creativity, strategic planning, and hard work Governor Cardoso is investing to ensure greater forex flows into the economy and improved accessibility for businesses. He reiterated that diaspora remittances, estimated at $23 billion annually, continue to be a reliable source of forex. Gwadabe also emphasized that the CBN’s initiatives have consistently supported the growth of these inflows, aligning with the institution’s goal of doubling formal remittance receipts within a year.
The anticipated increase in remittances is based on the CBN’s ongoing efforts to bolster public confidence in the foreign exchange market, strengthen a robust and inclusive banking system, and promote price stability—all vital for sustained economic growth. Charlie Bird of Verto further affirmed that dollar liquidity dynamics are now more balanced, enabling foreign investors and airlines to repatriate funds. He highlighted that Nigeria has become a "darling of foreign investors" due to improved dollar liquidity, a direct result of the CBN's positive reforms.