Nigeria’s FX turnover falls 51% to $1.81bn

Nigeria’s foreign exchange market recorded a sharp contraction in dollar transactions in the week ended 6 November, with turnover declining by 51.29 per cent to $1.81bn from $3.71bn a week earlier.

The $1.90bn decline in weekly trading value coincided with a marginal depreciation of the naira, raising questions about the relationship between reduced market activity and currency stability.

Data from FMDQ, which tracks transactions between authorised dealers and their customers, showed that average daily FX turnover fell to $361.67m from $742.51m in the preceding week.

The latest decline exceeded the 46.57 per cent weekly contraction recorded in July, when turnover fell to $1.63bn.

Spot transactions, which involve immediate or near-immediate delivery of foreign currency, accounted for the bulk of the decline.

Spot turnover fell by 50.91 per cent to $1.79bn from $3.64bn in the preceding week, accounting for approximately 97.3 per cent of the overall reduction in dollar trading.

The segment represented 98.77 per cent of total FX turnover during the week, compared with 98.01 per cent previously.

Average daily spot transactions declined to $357.23m from $727.74m, reflecting the significant slowdown in immediate dollar trading.

Forward transactions also weakened, falling by 69.93 per cent to $22.20m from $73.83m.

The derivatives segment accounted for 1.23 per cent of total turnover, compared with 1.99 per cent a week earlier.

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Average daily forward turnover dropped to $4.44m from $14.77m.

The decline in forward transactions reflects reduced activity in contracts for future currency delivery, although weekly turnover does not represent the value of outstanding forward positions.

Forward exchange rates also weakened across all reported maturities, indicating continued expectations of naira depreciation.

The one-month forward rate depreciated by 0.2 per cent to N1,370.19 per dollar, while the three-month rate weakened by the same margin to N1,405.78.

The six-month forward rate fell by 0.2 per cent to N1,455.88, while the one-year rate depreciated by 0.6 per cent to N1,557.65 per dollar.

The one-year contract recorded the largest percentage movement among the reported tenors.

Despite the latest movements, analysts expect the naira to remain relatively stable in the near term, supported by FX reserves and Nigeria’s current account surplus.

The domestic financial market is expected to receive N148.57bn from Treasury bills maturities and N774.53bn from Open Market Operations maturities this week.

The combined N923.10bn inflow could influence liquidity conditions and investors’ demand for FX, depending on how the funds are reinvested.