The Nigerian Foreign Exchange Market (NAFEM) saw a significant 61.9% year-on-year increase in dollar turnover, reaching $43.09 billion in the first 11 months of 2024 (11M’24), compared to $26.6 billion during the same period in 2023. This data, published by FMDQ, highlights notable shifts in quarterly and monthly trading activities.
Quarterly and Monthly Trends
In the first quarter of 2024 (Q1’24), turnover reached $12.64 billion but fell by 19% quarter-on-quarter (QoQ) to $10.24 billion in Q2’24. This downward trend persisted into Q3’24, with a marginal 0.87% decline to $10.15 billion.
October marked a recovery in trading volumes, with a 63% month-on-month (MoM) increase to $5.4 billion from $3.31 billion in September. This momentum continued in November, with turnover rising by 13.5% to $6.13 billion.
Mixed Naira Performance
The naira displayed mixed results across foreign exchange market segments in November. Within NAFEM, the currency appreciated slightly by N2.8 (0.16%) to close at N1,672.69 per dollar, compared to N1,675.49 in October.
However, in the parallel market, the naira depreciated by N10 (0.5%), ending November at N1,745 per dollar, down from N1,730 in October. This divergence widened the margin between the NAFEM rate and the parallel market rate to N72.31 per dollar in November, up from N54.61 in October.
Concerns Over Exchange Rate Pressure
The Central Bank of Nigeria’s Monetary Policy Committee (MPC), in its Communique No. 155, expressed concerns about sustained exchange rate pressures driven by high demand. The committee urged the CBN to explore alternative measures to enhance market liquidity and stabilize the exchange rate.
The MPC stated: “Members expressed concern over persisting exchange rate pressure, reflecting continued high demand in the market. Consequently, the Committee urged the Bank to explore measures to boost market liquidity.”
Outlook
The mixed performance of the naira and the widening gap between market rates highlight ongoing challenges in Nigeria’s forex market. Analysts suggest that improving liquidity remains critical for stabilizing the naira, as high demand continues to strain the foreign exchange market.
The NAFEM’s strong turnover growth reflects increased trading activity, but concerns about the currency’s stability may prompt further policy interventions to address market inefficiencies.
