The Nigerian Foreign Exchange Market (NAFEM) recorded a significant increase in dollar trade volume, with turnover rising by 61.9% year-on-year (YoY) to $43.09 billion in the first 11 months of 2024. This marks a substantial growth from the $26.6 billion recorded during the same period in 2023, according to data from the FMDQ.
Quarterly Breakdown of Turnover
The FMDQ report reveals a fluctuating trend in quarterly turnover for 2024:
- Q1 2024: Turnover reached $12.64 billion.
- Q2 2024: A quarter-on-quarter (QoQ) decline of 19% brought turnover down to $10.24 billion.
- Q3 2024: Turnover continued its downward trajectory, dropping slightly by 0.87% to $10.15 billion.
The market saw a rebound in the last two months of the period, with turnover increasing month-on-month (MoM) by 63% to $5.4 billion in October and rising a further 13.5% MoM to $6.13 billion in November.
Naira’s Mixed Performance
While turnover surged, the naira exhibited mixed performance in November across market segments:
- NAFEM: The naira appreciated by ₦2.8 (0.16%) to close at ₦1,672.69 per dollar at the end of November, up from ₦1,675.49 in October.
- Parallel Market: In contrast, the naira depreciated by ₦10 (0.5%), closing at ₦1,745 per dollar in November compared to ₦1,730 in October.
This divergence widened the gap between the parallel market rate and the NAFEM rate to ₦72.31 per dollar, up from ₦54.61 in October.
Policy Concerns
The Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) expressed apprehension over ongoing pressures on the exchange rate, as outlined in its Communique No. 155. The committee urged the CBN to implement additional measures to improve liquidity in the forex market.
“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,” the communique stated.
Outlook
The rise in forex turnover reflects a robust demand for foreign currency in the Nigerian economy. However, sustained pressure on the exchange rate and the widening disparity between official and parallel market rates highlight the need for structural reforms to stabilize the market and ensure equitable access to foreign exchange.
