The Nigerian foreign exchange market is experiencing a significant downturn, with the average daily forex turnover hitting its lowest point in August 2024. This decline has coincided with a continuous depreciation of the naira, which is now approaching N1,600 against the US dollar in the official market.
Decline in Forex Turnover
Recent data reveals that the average daily forex turnover fell to $143.97 million in August 2024, marking the lowest level since January 2024, when it stood at $97.36 million. Over the months, forex turnover fluctuated, peaking at $252.55 million in March before beginning a steady decline.
Key monthly forex turnover figures include:
– January 2024: $97.36 million
– February 2024: $222.85 million
– March 2024: $252.55 million
– April 2024: $194.16 million
– May 2024: $209.39 million
– June 2024: $195.95 million
– July 2024: $184.34 million
– August 2024: $143.97 million
The 21% reduction in forex turnover observed in the first half of August underscores the growing scarcity of dollars, exacerbated by the Central Bank of Nigeria’s (CBN) policies and inconsistent dollar supply.
Impact on the Naira
This decline in forex turnover has directly impacted the naira’s value in the official market. In early July 2024, the exchange rate averaged N1,508 per dollar, but by late August, it had depreciated close to N1,600 per dollar. Despite a 130% surge in remittance inflows to $553 million, the naira’s depreciation continues, highlighting the crucial role of consistent forex liquidity in maintaining exchange rate stability.
Market Sentiment and Future Outlook
The drop in forex turnover and the subsequent naira depreciation reflect broader challenges in the Nigerian economy, with forex supply constraints playing a pivotal role. A recent CBN survey indicates that many businesses anticipate further devaluation of the naira in the coming months due to ongoing pressures in the forex market.
Market operators, including Bureau De Change (BDC) operators, have expressed concerns about the CBN’s inconsistent dollar supply, which they argue is undermining efforts to stabilize the naira. The lack of a predictable dollar supply has led to increased speculative activities, further weakening the currency.
Bottom Line
The sharp decline in average daily forex turnover to its lowest level since January 2024 has had significant repercussions for the naira, which now hovers close to N1,600 per dollar. As the CBN continues to navigate the challenges of managing dollar supply, the outlook for the naira remains uncertain, with businesses and market operators bracing for potential further devaluation in the near future.
