Nigeria’s FX demand hits 15-year high as financial services tak...

Nigeria’s foreign exchange demand surged to its highest level in almost 15 years in the second quarter of 2026, driven largely by financial services transactions, even as the Central Bank of Nigeria (CBN) sharply reduced its direct dollar sales and autonomous sources supplied nearly three-quarters of market inflows.

Data from the Financial Markets Dealers Association (FMDA) showed that foreign exchange utilisation rose 12.84 per cent quarter-on-quarter to $18.34 billion in Q2, the highest quarterly level since the third quarter of 2011. The figure was also 52.42 per cent above the $12.03 billion recorded in the corresponding period of 2025.

Financial services accounted for $9.64 billion, representing 52.58 per cent of total utilisation, as demand in the category jumped 72.81 per cent from $5.58 billion a year earlier.

The surge highlights the growing importance of cross-border financial transactions in Nigeria’s foreign exchange market, with demand for services and financial payments increasingly outweighing merchandise import requirements.

Invisible transactions, which cover services and other payments rather than merchandise imports, reached a record $13.24 billion, accounting for 72.19 per cent of total foreign exchange utilisation. This was 93.16 per cent higher than the $6.85 billion recorded in Q2 2025.

Business services demand increased 191.39 per cent to $1.66 billion, while other services rose 118.66 per cent to $1.12 billion.

By contrast, import-related demand fell 1.49 per cent to $5.10 billion. Industrial imports declined 22.67 per cent to $1.86 billion, while oil imports fell 9.75 per cent to $1.25 billion. Demand for manufactured products, however, increased 77.73 per cent to $982.09 million.

The FMDA linked the increase in financial services utilisation to cross-border investment and payment flows, although its report did not provide a detailed breakdown of the transactions. The figure therefore cannot be attributed solely to investment repatriation or capital flight.

On the supply side, autonomous inflows rose to $23.31 billion, their highest level since the first quarter of 2020, accounting for 74.15 per cent of total foreign exchange inflows. The share was up from 68.48 per cent in Q1 2026 and 63.64 per cent in Q2 2025.

Total FX inflows, however, declined 2.96 per cent quarter-on-quarter to $31.43 billion, although they remained 14.04 per cent higher year-on-year.

The CBN’s direct FX sales fell sharply to $418.08 million, down 66.73 per cent from $1.26 billion in the first quarter and 86.79 per cent from $3.17 billion a year earlier. The FMDA said the apex bank’s sales of $1.67 billion in the first half were the lowest for any half-year period since its records began in 2008.

Meanwhile, total foreign exchange outflows fell 19.22 per cent to $8.93 billion, lifting net flows to $22.50 billion, the highest quarterly level since Q4 2019. First-half net flows reached $43.84 billion, up 47.24 per cent year-on-year.

The strong inflows have coincided with rising external reserves, which reached $55.07 billion on October 8, according to CBN data cited in the report, the highest level since December 2008.

For the economy, the figures present a mixed picture. Stronger autonomous inflows and rising reserves provide a larger external buffer, while lower CBN dollar sales suggest that supply is increasingly coming through other channels.

However, the record demand for financial services raises questions about the composition of Nigeria’s foreign exchange needs and the extent to which inflows support productive investment rather than financial transactions alone.

The challenge for policymakers is to sustain foreign exchange supply while ensuring that increased dollar availability translates into predictable access for manufacturers, importers and other businesses that require foreign currency to maintain production and investment