The Nigerian foreign exchange market saw a significant increase in transaction volume, reaching a total value of $584 million, according to the FMDQ Exchange’s report on Tuesday.
This marked a substantial rise from the previous $440 million daily transactions observed on the Nigeria Autonomous Foreign Exchange Market (NAFEX), indicating improved liquidity in the official forex market. Concurrently, the Nigerian Naira depreciated against the United States dollar, with the official market exchange rate closing at N1433 to a dollar on Tuesday, down from N1419 to a dollar on Monday.
Further data from the FMDQ Security Exchange showed a notable increase in forex turnover to $584.53 million on Tuesday, up from $440.13 million on Monday, translating to a 32.8 percent increase and suggesting a positive shift towards improved market liquidity.
This surge in forex market activity follows efforts by the Central Bank of Nigeria (CBN) to stabilize the foreign exchange rate amid economic pressures, including interventions in the forex market and regulatory directives for financial institutions. Commercial banks, the CBN itself, oil firms, and multinational corporations are significant contributors to dollar supply in the NAFEX. The CBN has issued new circulars and guidelines to enhance liquidity and bridge the gap between parallel and official forex rates. One recent measure involved directing banks to adjust their foreign exchange exposures to consolidate market stability and achieve a more unified exchange rate.
These measures are part of broader efforts to manage Nigeria’s economic challenges, particularly in the foreign exchange market, amidst fluctuating global economic conditions and domestic financial pressures. In response to concerns about banks’ growing foreign currency exposures, the CBN mandated that banks’ Net Open Position (NOP) must not exceed certain limits, giving a February 1, 2024 deadline for compliance. Following these adjustments, the national currency gained ground at the official market, closing at N1,455.59/$ on Wednesday, N1,445/$ on Thursday, and N1435.53/$ on Friday of the previous week. However, after trading on Tuesday, the naira depreciated marginally by 0.85 percent, with the dollar quoted at N1,433.89, stronger than N1,421.70 quoted on Monday at the NAFEM market.