Why CBN’s half-year FX sales fell to lowest in 19 years

Nigeria’s Central Bank of Nigeria (CBN) sold $1.67 billion in foreign exchange during the first half of 2026, its lowest first-half sales in 19 years.

According to the 2026 quarterly bulletin by the apex bank, data covering January to June from 2008 to 2026 show that the CBN’s foreign exchange sales fell 69.03 percent year-on-year to $1.67 billion in H1 2026 from $5.41 billion in the corresponding period of 2025.

The latest figure is also 93.03 percent below the $24.05 billion recorded in H1 2014, when the apex bank’s dollar sales reached their highest level in the period examined.

The decline comes after the CBN introduced a series of measures to reform the foreign exchange market, including unification of exchange rate windows, the settlement of verified outstanding foreign exchange obligations to investors and businesses, and the introduction of the Nigerian Foreign Exchange Code to strengthen transparency and market conduct.

The reforms were designed to address longstanding weaknesses in the market, including multiple exchange rates, speculative arbitrage, delayed settlement of legitimate foreign exchange obligations, and uncertainty over access to dollars.

CBN reforms shift FX supply towards private inflows

The changing structure of foreign exchange supply is evident in the second-quarter 2026 data published by the Financial Markets Dealers Association (FMDA) Research.

Its report, “Nigeria’s FX Market Update, Q2 2026”, showed that autonomous sources accounted for 74.15 percent of total foreign exchange inflows in the second quarter, their highest share in 13 years.

Autonomous inflows reached $23.31 billion out of total inflows of $31.43 billion, while the CBN’s own inflows declined 20.44 percent quarter-on-quarter.

The report also showed that the apex bank’s direct FX sales fell 66.73 percent quarter-on-quarter to $418.08 million in Q2 2026 from $1.26 billion in Q1. The combined first-half sales of $1.67 billion were 69.03 percent lower than the $5.41 billion recorded in H1 2025.

“The figures suggest that private-sector sources, rather than direct central bank sales, are accounting for a larger proportion of the dollars entering the economy. These sources include diaspora remittances, foreign portfolio investments and non-oil export proceeds,” Financial Markets Dealers Association (FMDA) disclosed.

In an earlier report by BusinessDay, total foreign exchange inflows into Nigeria reached $112 billion in 2025, with autonomous sources accounting for 64.94 percent of the total. Autonomous inflows rose to $72.91 billion from $59.29 billion in 2024 and $41.80 billion in 2023.

The growth in private inflows has coincided with efforts to rebuild investor confidence after the CBN inherited more than $7 billion in outstanding foreign exchange obligations under the previous market framework.

FX Code, backlog clearance target investor confidence

The settlement of verified FX backlogs was one of the major measures introduced to address investor concerns over Nigeria’s foreign exchange market.

In March 2024, the CBN announced that it had settled all valid outstanding foreign exchange obligations following a verification exercise conducted with independent auditors. The exercise was intended to resolve legitimate claims while excluding transactions that failed verification.

The clearance addressed a major concern for foreign investors and multinational companies that had struggled to repatriate funds or settle outstanding dollar obligations during the period of acute FX scarcity.

Olayemi Cardoso, governor of CBN, subsequently explained that clearing the backlog was necessary to restore confidence in the Nigerian economy.

“Credibility is at the heart of any central bank,” Cardoso said. He argued that investors need confidence that the authorities will honour legitimate commitments before committing capital to the economy.

The bank followed the backlog clearance with additional measures to improve the operation of the market. These included the Electronic Foreign Exchange Matching System, introduced in December 2024, and the Nigerian FX Code, launched in January 2025.

The matching system was designed to improve price discovery and transparency by strengthening the process through which FX transactions are matched. The FX Code established standards covering ethical conduct, governance, information sharing, risk management and compliance among authorised market participants.

The code also provides a framework for improving accountability among banks and other authorised dealers, with the CBN warning that breaches of its requirements could attract sanctions.

Analysts link reforms to rising autonomous inflows

Analysts have linked the reforms to improving investor confidence and the increase in foreign exchange inflows from private sources.

Muda Yusuf, CEO, Centre for the Promotion of Private Enterprise (CPPE), said the rise in autonomous inflows reflected the effect of reforms in positioning Nigeria to attract foreign capital.

“The autonomous inflows are driven by the reform,” Yusuf said, pointing to diaspora remittances, foreign portfolio investments and non-oil export proceeds as increasingly important sources of foreign exchange.

Yusuf also cautioned against attributing changes in market liquidity solely to the CBN’s direct interventions. He said the increase in private inflows was a major factor in the changing supply dynamics, noting that autonomous sources were not funds supplied by the apex bank.

His assessment suggests that the key measure of progress is not simply how much foreign exchange the CBN sells, but whether the market can attract and retain sufficient private capital to meet legitimate demand.

Charles Fakrogha, chief executive officer of ECL Asset Management, also linked the increased activity in the foreign exchange market to stronger commercial activity, including imports, exports and companies’ demand for raw materials.

Fakrogha, however, raised concerns about the composition of foreign exchange utilisation, particularly the dominance of financial services and the risk that the real sector could be left behind. He argued that the benefits of improved market functioning must translate into broader economic activity.

Lower sales do not eliminate liquidity risks

The rise in autonomous inflows has coincided with strong demand for foreign exchange.

The FMDA report showed that total FX utilisation reached $18.34 billion in Q2 2026, its highest level since the third quarter of 2011. Invisible-related transactions accounted for much of the increase, with demand reaching $13.24 billion, up 93.16 percent year-on-year.

Financial services alone absorbed $9.64 billion during the quarter, while total import-related demand stood at $5.10 billion. The figures indicate that cross-border financial and service transactions have become increasingly important drivers of dollar demand.

Agusto & Co., in its H1 2026 review, warned that Nigeria’s improved foreign exchange market functioning remained constrained by structural pressures.

“It identified the country’s dependence on imports, sizeable public- and private-sector foreign currency obligations and a narrow export base as continuing risks to sustainable FX liquidity,” the report disclosed.