Nigeria’s foreign exchange (FX) market experienced a significant boost in trading activity in July 2024, with a turnover of N11.48 trillion, equivalent to $7.39 billion, at the official trading window. This represents a substantial increase from the N10.01 trillion recorded in June, as reported by the FMDQ, which oversees the official foreign exchange trading platform in Nigeria.
In dollar terms, the FX market turnover in July saw a 10.02% month-on-month increase, amounting to $0.67 billion more than the $6.72 billion traded in June. This rise in turnover indicates a heightened level of activity in the forex market during the period under review.
However, the increased trading volume coincided with a depreciation of the naira against the US dollar. The average spot exchange rate in July rose by 4.88%, closing at $1/N1,560.32, compared to $1/N1,487.74 in June. The exchange rate volatility also heightened during this period, with the naira trading within a range of $1/N1,500.32 to $1/N1,621.12, a wider band than the $1/N1,473.66 to $1/N1,510.10 range observed in June.
By the end of the last trading week in July, the naira appreciated slightly by 62 basis points, closing at N1,570.14/$1 at the Nigerian Autonomous Foreign Exchange Market (NAFEM). The total turnover for that week stood at $120.81 million, with intra-day trading prices fluctuating between a high of N1,606/$1 and a low of N1,496/$1.
This increase in FX turnover reflects a broader trend of growing trading activities in Nigeria’s foreign exchange market. The Central Bank of Nigeria (CBN) has been actively monitoring these developments, noting that the average exchange rate for the naira against the dollar in the first quarter of 2024 had fallen by 35.53% to N1,304.72/$1, down from N841.15/$1 in the last quarter of 2023.
Businesses surveyed by the CBN expressed expectations of continued naira depreciation in the coming months, but with a potential rebound in the next six months. This outlook is based on various indices that suggest short-term challenges but a possible medium-term recovery for the naira.
In a related development, the CBN reported a significant increase in remittance inflows, which reached $553 million in July 2024. This marks a 130% year-on-year surge compared to July 2023. The CBN attributed this growth to recent policy measures aimed at enhancing liquidity in the FX market. These measures include the issuance of new licenses to international money transfer operators (IMTOs) and the adoption of a “willing buyer-willing seller” model, which has improved access to naira liquidity for IMTOs.
Analysts from Meristem Research have expressed optimism about the future of remittance inflows, predicting that they will continue to grow, supported by ongoing policy efforts and strategies designed to stabilize the FX market.
This increased FX turnover, coupled with rising remittance inflows, highlights the dynamic nature of Nigeria’s foreign exchange market and the ongoing efforts by regulators to manage and stabilize the economy in the face of fluctuating exchange rates and external financial pressures.
