There are growing indications that local investors who previously piled into dollar assets are now trimming their holdings as Foreign Portfolio Investors (FPIs) renew interest in Nigeria’s financial markets.

Analysts attribute this shift to tighter monetary policy, naira appreciation, and the lure of high-yield opportunities in naira-denominated assets.

Nigeria’s aggressive interest-rate stance has driven yields to record highs, making short-term government instruments such as Open Market Operations (OMO) bills and Treasury Bills highly attractive. FPIs are capitalising on double-digit returns amid improving macroeconomic indicators and growing confidence in the Central Bank of Nigeria’s (CBN) policy direction.

In the first half of 2025, FPIs injected about US$8.05 billion into Nigeria’s financial markets, largely drawn to fixed-income securities. On the equities side, FPIs transacted around N699.89 billion in March alone — the highest monthly volume recorded — representing 62.74 percent of total market turnover on the Nigerian Exchange (NGX).

The naira has also strengthened remarkably, appreciating to about N1,444.42 per US$1, its highest level in ten months. This improvement reflects better foreign exchange liquidity and sustained interventions by the CBN. Nigeria’s external reserves have similarly climbed to over US$43 billion as of late October 2025, providing further market stability.

Johnson Chukwu, Managing Director of Cowry Asset Management Limited, said the return of FPIs reflects renewed confidence in Nigeria’s monetary reforms. “Foreign investors are responding to policy consistency and attractive yields. The tightening stance of the CBN has made naira assets far more competitive relative to dollar holdings,” he explained.

Echoing this view, Tilewa Adebajo, CEO of CFG Advisory, noted that the naira’s rebound has been a major driver of portfolio reallocation. “The currency has stabilised due to improved forex supply and market reforms. Many local investors are now taking advantage of the strong naira and high interest rates to move back into domestic instruments,” he said.

While FPIs are boosting market liquidity and sentiment through short-term inflows, analysts caution that long-term investment remains constrained by structural bottlenecks such as weak infrastructure, policy uncertainty, and regulatory inconsistencies.

Sustaining investor confidence, they agree, will require deeper reforms to attract more stable, growth-oriented capital into the economy.

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