The decision to clear over $7bn in unsettled foreign exchange obligations has boosted investor confidence, as rising diaspora remittances, portfolio investments, and non-oil export earnings have strengthened reserves and accelerated recovery in Nigeria’s foreign exchange market, JIDE AJIA writes
The decision by the Central Bank of Nigeria to clear more than $7bn in unsettled foreign exchange obligations has continued to bolster investor confidence in the Nigerian economy, strengthen dollar inflows, and support the accretion of external reserves.
Almost three years after the clearance of the backlog, foreign exchange inflows into the Nigerian economy rose sharply, reaching $112bn in 2025, according to data from the Financial Markets Dealers Association’s latest report. Analysts said the growth in autonomous inflows, including diaspora remittances, foreign portfolio investments, and non-oil export proceeds, reflected the positive impact of ongoing reforms in attracting foreign capital into the domestic economy.
The improvement in investor confidence followed a systematic policy direction and commitment to due process driven by coordinated measures from the Central Bank of Nigeria and fiscal authorities.
CBN Governor, Olayemi Cardoso, said the apex bank’s move to clear the outstanding FX backlog was central to restoring confidence in Nigeria’s economy and attracting foreign investment. According to him, the decision reinforced the credibility of the country’s monetary authorities and assured investors that Nigeria would honour its obligations.
Cardoso had explained that although the funding strategy for settling the obligations was uncertain when he assumed office, he believed paying the verified claims was necessary to rebuild trust in the economy.
He said, “Credibility is at the heart of any central bank. If you don’t have credibility, people do not trust you, and they do not invest in your economy. When I took office, I made a promise that we would pay the backlog, the verifiable backlog of monies that were owed by Nigeria to third parties. And it was, at the time, estimated at over $7bn. And to be honest with you, I had no idea how I was going to do it, but I just felt it was not something to be negotiated.”
According to Cardoso, maintaining Nigeria’s integrity in the global financial system was essential. He explained that the apex bank commenced a forensic audit to properly assess the claims and determine the legitimacy of the outstanding obligations.
Following the recommendations of the audit, the bank proceeded with the settlement of verified FX transactions despite the huge financial sacrifice involved. He stated that, “as a going concern, the CBN knows that if it expects people to continue to trust and invest in our economy, you’ve got to keep your promises.”
Market observers noted that these measures, alongside exchange rate reforms and efforts to improve market transparency, have continued to encourage foreign investors to channel funds into the economy.
$112bn inflows
A report by the Financial Markets Dealers Association showed that forex inflows into the Nigerian economy climbed to $112bn in 2025, underscoring the increasing confidence of investors and market participants in the country’s economic reforms.
The report indicated that autonomous inflows accounted for 64.94 per cent of total FX inflows during the year, highlighting the growing role of private capital flows outside the direct control of the CBN.
It also showed that the Central Bank of Nigeria’s FX sales increased by 126.37 per cent during the period under review, rising to $8.94bn from $3.95bn recorded in the previous year.
Autonomous inflows surged to $72.91bn in 2025, compared to $59.29bn in 2024 and $41.80bn in 2023, reflecting a sharp increase in private-sector foreign exchange inflows within two years.
The FMDA data suggested that autonomous inflows are gradually replacing CBN-supplied liquidity as the primary source of foreign exchange availability in the market, although the apex bank continues to maintain a stabilising presence.
Total FX utilisation rose to $47.17bn in 2025, largely driven by a substantial increase in invisible-related transactions as well as sustained demand from the industrial sector.
The report showed that invisible-related FX utilisation increased to $27.27bn in 2025 from $11.10bn in 2024. Financial services alone accounted for $21.22bn of the total utilisation during the year.
Import-related FX demand also increased, though at a slower pace, rising from $15.54bn in 2024 to $19.90bn in 2025. The industrial sector remained the largest merchandise-related source of demand, accounting for $8.43bn, compared to $7.96bn recorded in 2024.
According to the report, “Oil-sector FX demand nearly doubled, from $2.26bn in 2024 to $4.98bn in 2025. Business services demand leapt from $702.38m to $3.48bn, while educational services demand fell sharply from $396.40m in 2023 to just $55.16m in 2025.”
The figures showed that invisible transactions, which include services, financial flows, and cross-border payments, have overtaken merchandise imports as the largest source of FX demand in Nigeria.
Before the reforms, Nigeria’s foreign exchange market had struggled with a backlog exceeding $7bn in unmet obligations, while the country also operated a fragmented FX regime characterised by multiple exchange rates.
The multiple-rate structure created opportunities for arbitrage, discouraged foreign investment, and contributed to the depletion of external reserves, which dropped to $33.22bn in December 2023.
Analysts also noted that the cost of maintaining the FX subsidy regime was estimated to be significantly higher than the cost of fuel subsidies. To address these challenges, the apex bank introduced reforms aimed at unifying the exchange rate system, eliminating market distortions, and improving transparency in the FX market.
The unification process enabled the CBN to clear outstanding obligations owed to businesses, including manufacturers and airlines, thereby improving confidence and enabling firms to plan more effectively for future investments.
The central bank also launched an electronic FX matching platform to improve the efficiency and transparency of the market. The platform had already delivered positive results in other financial markets before its adoption in Nigeria. The reforms have since attracted favourable assessments from global credit rating agencies.
Rating agencies speak
Fitch Ratings stated that the CBN’s measures, including exchange rate unification, the deployment of an electronic FX matching system, the introduction of a new FX code, and tighter monetary policy, demonstrated the authorities’ commitment to achieving sustainable economic growth and exchange rate stability.
The agency subsequently upgraded Nigeria’s long-term foreign-currency issuer default rating outlook from negative to stable, improving the country’s prospects of attracting foreign investment and accessing international capital markets on better terms.
Fitch also commended the government’s commitment to policy reforms introduced since June 2023, including exchange rate liberalisation, tighter monetary policy, steps to curb deficit monetisation, and the removal of fuel subsidies.
According to the agency, “These have improved policy coherence and credibility and reduced economic distortions and near-term risks to macroeconomic stability, enhancing resilience in the context of persistent domestic challenges and heightened external risks.”
S&P Global Ratings also revised Nigeria’s outlook from “stable” to “positive” while affirming the country’s sovereign rating at “B-/B”. “The monetary, economic, and fiscal reforms being implemented by Nigerian authorities will yield positive benefits over the medium term,” S&P said.
Moody’s equally upgraded Nigeria’s rating by one notch to “B3” from “Caa1”, citing notable improvements in the country’s external and fiscal conditions, while Fitch retained its “B” rating and stable outlook.
The rating agencies consistently identified the foreign exchange reforms introduced by the CBN as major contributors to improved macroeconomic stability and efforts to tame inflationary pressures.
President of the Association of Bureaux De Change Operators of Nigeria, Dr Aminu Gwadabe, welcomed the rating upgrades and praised the reforms implemented in the foreign exchange market. According to him, the reforms had contributed significantly to exchange rate stability and were helping the economy achieve sustainable growth.
Other analysts described the S&P rating action as “a significant step forward in restoring investor confidence and economic stability.”
They argued that the improved outlook reflected stronger creditworthiness for Nigeria and could create fresh opportunities across multiple sectors of the economy.
Analysts speak
Convener of the Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said the rise in autonomous inflows clearly demonstrated the impact of the reforms.
“The autonomous inflows are driven by the reform. Remittances from the diaspora, inflows from foreign portfolio investors, non-oil export proceeds — all manner of things outside the traditional sources of our forex. This reflects the fact that the reform has positioned the economy to attract those inflows,” he said.
Commenting on the increase in CBN FX sales, Yusuf said the development should not necessarily be interpreted as a major rise in direct intervention by the apex bank.
“It is not necessarily because the CBN has significantly increased its intervention. A lot of inflows are coming in. Those are not CBN funds. In fact, there was a time the CBN was even buying forex on the market because of the liquidity. The bigger factor is the supply side — the fact that autonomous inflows have increased significantly,” he stated.
The former Director-General of the Lagos Chamber of Commerce and Industry also explained the sharp rise in invisible-related transactions, noting that many international obligations fall within that category.
“Invisible covers a lot of things. When you are paying foreign debt, it is a financial services transaction. When airlines come to Nigeria, when shipping companies operate here, when expatriates come into oil and gas and tech — all of these services have to be paid for in foreign currency. There is a lot of international transactions going on now because of the confidence the reform has restored. That is what I think is behind that increase,” he explained.
Chief Executive Officer of ECL Asset Management, Mr Charles Fakrogha, said the increase in FX sales and autonomous inflows aligned with the broader signals emerging from the capital market.
“The kind of activity we are seeing from the FX market shows there are a lot of activities in terms of imports and exports. Most of these companies import raw materials, some export finished products — all of this will account for the increase we are seeing,” he said.
However, Fakrogha expressed concerns over the dominance of financial services in foreign exchange utilisation. “Financial services — you have seen a lot of activities. We have seen so many financial institutions springing up. And yet the real sector is not being carried along.
“When it is tough for financial services to give out loans and recover them, what happens? They go to the treasury bills market — a safe investment. And the real sector suffers. These are the structural imbalances in the economy that we are seeing,” he noted.
Speaking on exchange rate unification, Fakrogha described it as one of the most important drivers of the current inflows. “That is the fundamental of it. The unification has closed the gap for unnecessary speculation. The CBN has done quite a lot in terms of maintaining stability. If not for that unification, the dollar-naira rate would have gone beyond what we are seeing,” he said.
Chief Executive Officer of Globalview Capital, Mr Aruna Kebira, argued that stronger regulation and the recapitalisation of financial institutions had also played a key role in attracting investments.
“There is no direct investor who would not like to do business with a well-capitalised stockbroking firm. The regulation is so strong. All the banks are recapitalised, insurance companies are in the process of recapitalisation, and PFAs are also being recapitalised. Things have actually opened up,” he said.
Kebira also pointed to rising confidence among Nigerians in the diaspora as an emerging source of autonomous inflows into the economy. “Do you know that Nigerians in diaspora now have serious confidence in the Nigerian stock market? The movement from 58,000 to 250,000 points — it is not magic. Money is coming in. It is for investment,” he stated.
According to him, several diaspora investors had already earmarked funds for investment in the proposed Initial Public Offer of Dangote Refinery.
When Cardoso assumed office in October 2023, he prioritised policies aimed at rebuilding Nigeria’s economic buffers and strengthening resilience within the financial system.
The CBN’s reforms, particularly the currency and foreign exchange measures, subsequently helped to attract investment inflows into the economy while reducing pressure on the domestic FX market through lower intervention levels by the apex bank.
