The official foreign exchange market in Nigeria has experienced a significant surge in turnover, reaching $11.43 billion within a span of just over two months, following recent reforms by the Central Bank of Nigeria, according to findings
Reports and data from FMDQ Securities, a platform that publishes official foreign exchange trading information, reveal a staggering increase of 185.75 percent or $7.43 billion, between January and March 15th through the Nigerian Autonomous Foreign Exchange by Deposit Money Banks.
Key players in this market include commercial banks, the Central Bank of Nigeria (CBN), and international oil firms, who primarily serve as sellers of forex at NAFEM.
This surge in liquidity follows a directive from the CBN on February 1, 2024, compelling banks to offload excess dollar stocks within 24 hours to bolster liquidity in the FX market.
The move, aimed at unifying the official and parallel market exchange rates, has been met with approval from economists and stakeholders, despite the naira hitting an all-time low of N1,850/$ at the parallel market.
However, concerns linger regarding clearing FX backlogs estimated at over $5 billion and ensuring adequate funding for FX demands at the official market to prevent further disparities between official and parallel market rates.
Analysing the dollar supply, the forex market witnessed a $4 billion turnover in January, with an additional $3.3 billion within the first two weeks of February following the implementation of new rules.
Subsequently, the supply stabilised, recording $890.65 million between February 19 and 23, which increased to $953.02 million by the week ending February 26 to March 1.
However, fluctuations were observed, with a gain of $1.07 billion in forex turnover between March 4 and 8, followed by a reduction to $848.14 million the following week (March 11 to 15).
Despite these fluctuations, the naira is expected to stabilise further amid moderation in demand pressure and a decline in dollar supply.
On Monday, the naira marginally appreciated against the United States dollar to N1,572.86 at the official market, with the intraday high closing at N1,640/$ and the intraday low at N1,400.
Additionally, the daily FX market turnover saw a 2.19 percent increase to $140.45 million on Monday compared to the previous Friday.
The positive momentum extended into the previous week, with the naira gaining 0.95 percent against the dollar, closing at N1,602.75 on Friday at the official FX market, while trading between N1,600 and N1,610 at the parallel market.
Overall, these developments underscore the impact of recent CBN reforms on the Nigerian forex market, with attention now focused on sustaining stability and addressing remaining challenges.
