Global Investors Flock to Nigeria’s High-Yield Fixed-Income Market, Strengthening Currency Stability and FX Reserves…
Nigeria’s foreign exchange inflows surged to $3.0 billion in January 2026, marking a notable 7% month-on-month increase, as foreign portfolio investors (FPIs) continue to capitalize on the country’s attractive yields. This is the second consecutive month of positive momentum in the FX market, underscoring the growing confidence of offshore capital in Nigeria’s economic outlook.
According to the latest data from FMDQ, the rise in foreign inflows signals a continued recovery in FX supply, which has shown signs of strengthening since the close of 2025. The significant rebound in portfolio inflows has played a central role in stabilizing the foreign exchange market, with a particular emphasis on Nigeria’s fixed-income sector.
Massive Surge in Foreign Portfolio Inflows: High Yields Lure Global Capital
The month of January saw foreign portfolio investments skyrocket by a staggering 151% compared to December, reaching $1.6 billion. Investors flocked to Nigeria’s lucrative fixed-income market, with treasury bills and bonds absorbing the bulk of these inflows. Out of the total portfolio inflows, approximately $1.5 billion nearly 98% was directed into Nigerian government bonds and debt instruments, with only a small fraction ($38.7 million) funneled into the equities market.
This sharp uptick in FPI has reinforced Nigeria’s position as an attractive destination for yield-seeking investors, with high interest rates and sovereign debt returns continuing to drive interest from offshore markets.
International Corporate and Foreign Direct Investment Inflows Also on the Rise
While portfolio investments dominated the FX inflows in January, international corporate inflows also saw a significant boost, rising by 83% to $155.4 million. Meanwhile, Foreign Direct Investment (FDI) crept up slightly, recording a modest increase of $2 million to $50.3 million. Despite these gains, the overall contribution of FDI remains relatively small compared to portfolio flows.
This growing external participation has been crucial in reducing pressure on Nigeria’s currency market and alleviating the volatility that had plagued the naira in previous months.
CBN’s Role Diminishes as Foreign Capital Takes Center Stage
As offshore capital continues to pour into Nigeria, the role of the Central Bank of Nigeria (CBN) in maintaining FX liquidity has drastically reduced. In January, the CBN’s direct contribution to FX supply plummeted to just $34 million, a sharp decline from the $654 million provided in December. This reflects a larger shift in the market, where reliance on the CBN’s intervention has decreased significantly, as external investors take the lead in bolstering the country’s foreign exchange reserves.
Domestic sources of FX supply also saw a decline in January, with inflows from exporters falling by 15%, while individual remittances dropped by 39%. Non-bank corporates posted a slight increase, with a 2.4% rise in their FX inflows to $430.4 million.
A Glimmer of Hope: FX Reserves and Naira Stability
The increase in foreign inflows has also had a positive impact on Nigeria’s foreign exchange reserves, which rose to an impressive $46 billion by the end of January 2026—the highest level in nearly eight years. This growth in reserves is a crucial indicator of the country’s improved FX buffers and provides much-needed stability to the naira.
For the first time in months, Nigeria has seen reduced volatility in its currency markets, with the naira remaining relatively stable as the flow of foreign capital strengthens the market dynamics. This stability has reduced the need for the CBN’s intervention in stabilizing the naira, which had been a common feature during periods of FX liquidity shortages.
The Road Ahead: Will This Momentum Continue?
While the current surge in foreign inflows is a welcome sign of recovery, the sustainability of this trend is far from guaranteed. Nigeria’s dependence on short-term portfolio inflows for FX liquidity introduces a level of vulnerability, as these investments can quickly shift based on global market conditions and investor sentiment.
The challenge for Nigeria lies in transforming these short-term capital flows into long-term, sustainable investments. As the country looks to strengthen its economic fundamentals, continued stability in the FX market will depend on maintaining investor confidence, ensuring consistent policy frameworks, and enhancing Nigeria’s appeal as a destination for more permanent foreign investments.
With foreign capital continuing to play a dominant role in Nigeria’s FX market, the coming months will be crucial in determining whether this positive trend can be sustained and whether it can be leveraged to reduce long-term economic volatility.
Key Highlights:
- FX Inflows: Nigeria saw $3.0 billion in FX inflows in January 2026, driven by a 151% increase in foreign portfolio investments.
- Currency Stability: The influx of foreign capital has helped stabilize the naira, reducing market volatility.
- Reserves Growth: Nigeria’s foreign reserves rose to $46 billion, the highest level in eight years.
- CBN’s Reduced Role: The Central Bank’s contribution to FX supply dropped significantly in January, indicating a shift toward external capital reliance.
