Nigeria’s FX market records lowest turnover since January amid economic strain

The forex turnover on Nigeria’s FMDQ, the official exchange rate trading platform, fell to just $61.9 million on Tuesday, marking the lowest daily turnover since January 2024.

This is the second-lowest daily turnover this year, with the lowest being $59.6 million recorded on January 8, 2024.

January saw particularly low forex turnover as the Central Bank of Nigeria (CBN) struggled to restore confidence in its forex policy.

Although the market has stabilized since then, the naira has depreciated by over 40% this year.

On Tuesday, the exchange rate closed at N1,601/$1, a slight appreciation of 0.38% from N1,607.15/$1 on Monday. However, intra-day trading showed highs and lows of N1,623 and N1,560, respectively, indicating continued pressure on the naira.

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The recent drop in forex turnover follows Monday’s already low figure of $77 million, suggesting a possible squeeze in the market.

Traders speculate that the ongoing “end hunger” protests across Nigeria, which have disrupted business activities, and significant stock market sell-offs could be contributing factors.

Meanwhile, the parallel market rate closely mirrored the official rate, trading at around N1,605/$1. Notably, the CBN has not sold any foreign exchange on the official market this week, possibly due to the ongoing protests.

In July, the CBN sold a total of $377.17 million to authorized FOREX dealers in an effort to boost liquidity.

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The bank also plans to conduct a Retail Dutch Auction System (DAS) on Wednesday, August 7, 2024, to manage demand for eligible transactions.