The naira on Monday closed flat in the official foreign exchange (FX) market as Nigeria’s external reserves climbed to $46.7 billion, supported by Eurobond issuance and the strongest FX inflows recorded in six months.

The steady performance of the local currency came as rising inflows, driven by renewed foreign investor interest and recent Eurobond proceeds, helped to strengthen the country’s reserve position.

Data published by the Central Bank of Nigeria (CBN) showed that the naira depreciated marginally by 0.4 percent as the dollar was quoted at N1,448.03 on Monday compared to N1,442.43 on Friday at the Nigerian Foreign Exchange Market (NFEM).

In the parallel market, the naira gained slightly by N2, closing at N1,455 on Monday as against N1,457 on Friday.

Nigeria’s external reserves reaching the $46.7 billion mark has been largely attributed to the federal government’s Eurobond issuance and rising FX inflows.

Tilewa Adebajo, chief executive officer of CFG Advisory, said, “The CBN also reports that reserves have hit an eight-year high of $46.7 billion.”

October 2025 marked the country’s strongest month for foreign exchange inflows since May, boosted by improved macroeconomic stability and renewed appetite from offshore investors seeking opportunities in Africa’s largest economy.

Analysts at FBNQuest Merchant Bank linked the rebound to ‘carry-trade opportunities’ in Nigeria’s FX market amid elevated domestic interest rates. According to the firm, the combination of high local rates and recent policy easing by the US Federal Reserve has widened the rate differential between both countries, making Nigerian assets more appealing. “This significant carry-trade has reinforced Nigeria’s position as an attractive investment destination for offshore investors seeking higher yields,” the firm said in a note on Tuesday.

The renewed investor confidence is further demonstrated by the 400 percent oversubscription of Nigeria’s $2.35 billion Eurobond issued two weeks ago. The country is also gaining positive attention from global rating agencies, with S&P Global recently revising Nigeria’s outlook from ‘stable’ to ‘positive’ while affirming its ‘B-/B’ rating.

Samuel Sule, chief executive officer of Renaissance Capital Africa, said the return of macroeconomic stability and highly attractive real returns are drawing investors back to the local currency debt market. “Expect that their continued participation will be determined by future rate conditions and the stability of the FX,” he said.

FMDQ data also show that foreign investors accounted for more than half of the total FX inflows during the period, rising by 161 percent to $3.5 billion. Inflows into fixed-income securities alone stood at $3.4 billion, underscoring the strong demand for Nigeria’s high-yield instruments. Local participation also strengthened, with FX contributions from individual investors surging to $602 million from $104 million in the previous month, indicating improved accessibility and deeper retail engagement.

However, Foreign Direct Investment (FDI) inflows fell by 25 percent month-on-month to $222 million, reflecting persistent structural challenges such as insecurity and policy uncertainty that continue to deter long-term capital.

The FX market continues to receive strong inflows even as a bigger interest rate cut looms. Despite the Monetary Policy Committee (MPC) lowering benchmark interest rates by 50 basis points to 27 percent in September, its first cut since 2020, Nigeria still maintains one of the highest policy rates globally, making it highly attractive for foreign portfolio investors. The rare stability of the naira, alongside continued moderation in inflation, which eased for the seventh consecutive month to 16.1 percent in October 2025, is further boosting sentiment and may pave the way for deeper policy easing.

“Despite expectations of an additional rate cut by the MPC later this month, we anticipate sustained foreign portfolio inflows, supported by attractive interest rate differentials,” analysts at FBNQuest Merchant Bank said. (BusinessDay)